An inquiry into the nature and causes of the wealth of nations

Atf

INQUIRY

TNTO THE

NATURE AND CAUSES

OF THE

WEALTH OP NATIONS.

AN

INQUIRY

INTO THE

NATURE AND CAUSES

OF THE

WEALTH OF NATIONS

BY ADAM SMITH, LL. D.

AND F.R.S. OF LONDON AND EDINBURGH :

ONF. OF THE COMMISSIONERS OF HIS MAJESTY'S CUSTOMS IN SCOTLAND J
AND FORMERLY PROFESSOR OF MORAL PHILOSOPHY
IN THE UNIVERSITY OF GLASGOW.

IN THREE VOLUMES.

VOL. II.

A NEW EDITION.

LONDON :

PRINTED FOR G. WALKER, J, AKERMAN, E. EDWARDS; THOMAS
TEGG : G. AND J. ROBINSON, LIVERPOOL; E. THOMPSON, MAN
CHESTER ; J. NOBLE, HULL; J. WILSON, BERWICK; W. WHYTB

AND co. EDINBURGH; AND R. GRIFFIN AND co. GLASGOW.

V '?*•

'\N '''til

Printed by T. Davison,
Whitefriars.

b

A

CONTENTS

OF

VOL. II.

BOOK II.

CHAPTER III.

Of the Accumulation of Capital, or of productive
and unproductive Labour .... Page 2

CHAPTER IV.

Of Stock lent at Interest ! ''*"" . . 33

CHAPTER V.

Of the different Employment of Capitals . 46

BOOK III.

Of the different Progress of Opulence in different
Nations.

CHAPTER I.

Of the natural Progress of Opulence . > • • 73

VI CONTEXTS.

CHAPTER II.

Of the Discouragement of Agriculture in the ancient
State of Europe after the Fall of the Roman Em
pire i . « Page 81

CHAPTER III.

Of the Rise and Progress of Cities and Towns, after
the Fall of the Roman Empire . . . .99

CHAPTER IV.

How the Commerce of the Towns contributed to the
Improvement of the Country . . .117

BOOK IV.

Of Systems of Political (Economy.
INTRODUCTION ... . . •'.-. ; 1*™/M • 138

CHAPTER I.

Of the Principle of the Commercial or Mercantile
System . . ?''. M f* . 139

CHAPTER II.

Of Restraints upon the Importation from foreign
Countries of such Goods as can be produced at
Home . , vVr-. , .;' . . .176

CHAPTER III.

Of the extraordinary Restraints upon the Importa
tion of Goods of almost all Kinds, from those
Countries with which the Balance is supposed to
be disadvantageous . . 209

CONTENTS. Vll

PART 1. Of the Unreasonableness of those Restraints
even upon the Principles of the Commercial System

Page 209

Digression concerning Banks of Deposit, particularly
concerning that of Amsterdam . . 219

PART II. Of the Unreasonableness of those extra
ordinary Restraints upon other Principles . . 235

CHAPTER IV.

Of Drawbacks . .... . . 252

CHAPTER V.
Of Bounties. . . ., . . \ .261

Digression concerning the Corn Trade and Corn
Laws . . , . , . . . 290

CHAPTER VI.

Of Treaties of Commerce . . r . 323

CHAPTER VII.

Of Colonies . . ., . . 343

PART!. Of the Motives for establishing new Colonies ib.
PART II. Causes of the Prosperity of new Colonies 358

PART III. Of the Advantages which Europe has
derived from the Discovery of America, and from
that of a Passage to the East Indies by the Cape
of Good Hope . . . . 400

CHAPTER VIII.

Conclusion of the Mercantile System . « . 485

INQUIRY

INTO

THE NATURE AND CAUSES

OF THE

WEALTH OF NATIONS.

BOOK II.

CHAPTER III.

Of the Accumulation of Capital, or of productive
and unproductive Labour.

THERE is one sort of labour which adds
to the value of the subject upon which it is
bestowed : there is another which has no such
effect. The former, as it produces a value,
may be called productive ; the latter, unpro
ductive * labour. Thus the labour of a manu
facturer adds, generally, to the value of the
materials which he works upon, that of his own

* Some French authors of great learning and ingenuity
have used those words in a different sense. In the last chapter
of the fourth book, I shall endeavour to show that their sense
is an improper one.

VOL. II. B

2 THE NATURE AND CAUSES OF BOOK II.

maintenance, and of his master's profit. The
labour of a menial servant, on the contrary, adds
to the value of nothing. Though the manu
facturer has his wages advanced to him by his
master, he, in reality, costs him no expense, the
value of those wages being generally restored,
together with a profit, in the improved value of
the subject upon which his labour is bestowed.
But the maintenance of a menial servant never
is restored. A man grows rich by employing a
multitude of manufacturers : he grows poor, by
maintaining a multitude of menial servants. The
labour of the latter, however, has its value, and
deserves its reward as well as that of the former.
But the labour of the manufacturer fixes and re
alises itself in some particular subject or vendible
commodity, which lasts for some time at least
after that labour is past. It is, as it were, a cer
tain quantity of labour stocked and stored up to
be employed, if necessary, upon some other oc
casion. That subject, or what is the same thing,
the price of that subject, can afterwards, if ne
cessary, put into motion a quantity of labour
equal to that which had originally produced it.
The labour of the menial servant, on the con
trary, does not fix or realise itself in any par
ticular subject or vendible commodity. His ser
vices generally perish in the very instant of their
performance, and seldom leave any trace of value
behind them, for which an equal quantity of ser
vice could afterwards be procured.

The labour of some of the most respectable
orders in the society is, like that of menial ser-

CHAP. m. THE WEALTH OF NATIONS. 3

vants, unproductive of any value, and does not
fix or realise itself in any permanent subject, or
vendible commodity, which endures after that
labour is past, and for which an equal quantity
of labour could afterwards be procured. The
sovereign, for example, with all the officers both
of justice and war who serve under him, the whole
army and navy, are unproductive labourers.
They are the servants of the public, and are
maintained by a part of the annual produce of
the industry of other people. Their service, how
honourable, how useful, or how necessary soever,
produces nothing for which an equal quantity of
service can afterwards be procured. The pro
tection, security, and defence of the common
wealth, the effect of their labour this year, will
not purchase its protection, security, and defence
for the year to come. In the same class must be
ranked, some both of the gravest and most im
portant, and some of the most frivolous pro
fessions : churchmen, lawyers, physicians, men of
letters of all kinds ; players, buffoons, musicians,
opera-singers, opera-dancers, &c. The labour
of the meanest of these has a certain value, regu
lated by the very same principles which regulate
that of every other sort of labour ; and that of
the noblest and most useful, produces nothing
which could afterwards purchase or procure an
equal quantity of labour. Like the declamation
of the actor, the harangue of the orator, or the
tune of the musician, the work of all of them
perishes in the very instant of its production.

B 2

THE NATURE AND CAUSES OF BOOK II.

Both productive and unproductive labourers,
and those who do not labour at all, are all
equally maintained by the annual produce of the
land and labour of the country. This produce,
how great soever, can never be infinite, but must
have certain limits. According, therefore, as a
smaller or greater proportion of it is in any
one year employed in maintaining unproductive
hands, the more in the one case and the less in
the other will remain for the productive, and the
next year's produce will be greater or smaller
accordingly ; the whole annual produce, if we
except the spontaneous productions of the earth,
being the effect of productive labour.

Though the whole annual produce of the
land and labour of every country, is, no doubt,
ultimately destined for supplying the consump
tion of its inhabitants, and for procuring a re
venue to them ; yet when it first comes either
from the ground, or from the hands of the pro
ductive labourers, it naturally divides itself into
two parts. One of them, and frequently the
largest, is, in the first place, destined for replacing
a capital, or for renewing the provisions, mate
rials, and finished work, which had been with
drawn from a capital, the other for constituting
a revenue either to the owner of this capital, as
the profit of his stock ; or to some other person,
as the rent of his land. Thus, of the produce of
land, one part replaces the capital of the farmer ;
the other pays his profit and the rent of the land
lord ; and thus constitutes a revenue both to the

CHAP. in. THE WEALTH OF NATIONS. 5

owner of this capital, as the profits of his stock ;
and to some other person, as the rent of his land.
Of the produce of a great manufactory, in the
same manner, one part, and that always the
largest, replaces the capital of the undertaker of
the work ; the 'other pays his profit, and thus
constitutes a revenue to the owner of this
capital.

That part of the annual produce of the land
and labour of any country which replaces a ca
pital, never is immediately employed to maintain
any but productive hands. It pays the wages of
productive labour only. That which is immedi
ately destined for constituting a revenue either
as profit or as rent, may maintain indifferently
either productive or unproductive hands.

Whatever part of his stock a man employs as
a capital, he always expects it to be replaced to
him with a profit. He employs it, therefore, in
maintaining productive hands only ; and after
having served in the function of a capital to him,
it constitutes a revenue to them. Whenever he
employs any part of it in maintaining unproduc
tive hands of any kind, that part is, from that
moment, withdrawn from his capital, and placed
in his stock reserved for immediate consumption.

Unproductive labourers, and those who do
not labour at all, are all maintained by revenue ;
either, first, by that part of the annual produce
which is originally destined for constituting a
revenue to some particular persons, either as the
rent of land or as the profits of stock ; or, se
condly, by that part which, though originally
destined for replacing a capital and for maintain-

6 THE NATU11E AND CAUSES OF BOOK II.

ing productive labourers only, yet when it comes
into their hands, whatever part of it is over and
above their necessary subsistence, may be em
ployed in maintaining indifferently either produc
tive or unproductive lands. Thus, not only the
great landlord or the rich merchant, but even
the common workman, if his wages are consider
able, may maintain a menial servant ; or he may
sometimes go to a play or a puppet-show, and so
contribute his share towards maintaining one set
of unproductive labourers ; or he may pay some
taxes, and thus help to maintain another, set,
more honourable and useful, indeed, but equally
unproductive. No part of the annual produce,
however, wrhich had been originally destined to
replace a capital, is ever directed towards main
taining unproductive hands, till after it has put
into motion its full complement of productive
labour, or all that it could put into motion in the
way in which it was employed. The workman
must have earned his wages by work done, before
he can employ any part of them in this manner.
That part too is generally but a small one. It
is his spare revenue only, of which productive
labourers have seldom a great deal. They gene
rally have some, however ; and in the payment
of taxes the greatness of their number may com
pensate, in some measure, the smallness of their
contribution. The rent of land and the profits
of stock are every where, therefore, the princi
pal sources from which unproductive hands de
rive their subsistence. These are the two sorts of
revenue of which the owners have generally most
to spare. They might both maintain indiffer-

CHAP. III. THE WEALTH OF NATIONS. 7

ently either productive or unproductive hands.
They seem, however* to have some predilection
for the latter. The expense of a great lord feeds
generally more idle than industrious people. The
rich merchant, though with his capital he main
tains industrious people only, yet by his expense,
that is, by the employment of his revenue, he
feeds commonly the very same sort as the great
lord.

The proportion, therefore, between the pro
ductive and unproductive hands, depends very
much in every country upon the proportion be
tween that part of the annual produce, which, as
soon as it comes either from the ground or from
the hands of the productive labourers, is destined
for replacing a capital, and that which is destined
for constituting a revenue either as rent or as
profit. This proportion is very different in rich
from what it is in poor countries.

Thus, at present, in the opulent countries of
Europe, a very large, frequently the largest por
tion of the produce of the land, is destined for
replacing the capital of the rich and independent
farmer ; the other for paying his profits, and the
rent of the landlord. But anciently, during the
prevalency of the feudal government, a very small
portion of the produce was sufficient to replace
the capital employed in cultivation. It consisted
commonly in a few wretched cattle, maintained
altogether by the spontaneous produce of uncul
tivated land, and which might, therefore, be
considered as a part of that spontaneous produce.
It generally too belonged to the landlord, and

8 THE NATURE AND CAUSES OF BOOK II,

was by him advanced to the occupiers of the
land. All the rest of the produce properly be
longed to him too, either as rent for his land, or
as profit upon this paltry capital. The occu
piers of land were generally bondmen, whose
persons and effects were equally his property.
Those who were not bondmen were tenants at
will, and though the rent which they paid was
often nominally little more than a quit-rent, it
really amounted to the whole produce of the
land. Their lord could at all times command
their labour in peace, and their service in war.
Though they lived at a distance from his house,
they were equally dependent upon him as his
retainers who lived in it. But the whole pro
duce of the land undoubtedly belongs to him,
who can dispose of the labour and service of all
those whom it maintains. In the present state of
Europe, the share of the landlord seldom exceeds
a third, sometimes not a fourth part of the whole
produce of the land. The rent of land, how
ever, in all the improved parts of the country,
has been tripled and quadrupled since those an
cient times ; and this third or fourth part of the
annual produce is, it seems, three or four times
greater than the whole had been before. In the
progress of improvement, rent, though it in
creases in proportion to the extent, diminishes in
proportion to the produce of the land.

In the opulent countries of Europe, great ca
pitals are at present employed in trade and ma
nufactures. In the ancient state, the little trade
that was stirring, and the few homely and coarse

CHAP. III. THE WEALTH OF NATIONS. 9

manufactures that were carried on, required but
very small capitals. These, however, must have
yielded very large profits. The rate of interest
was no-where less than ten per cent, and their
profits must have been sufficient to afford this
great interest. At present the rate of interest,
in the improved parts of Europe, is no-where
higher than six per cent, and in some of the most
improved it is so low as four, three, and two per
cent. Though that part of the revenue of the in
habitants which is derived from the profits of
stock is always much greater in rich than in
poor countries, it is because the stock is much
greater : in proportion to the stock the profits
are generally much less.

That part of the annual produce, therefore,
which, as soon as it comes either from the ground,
or from the hands of the productive labourers,
is destined for replacing a capital, is not only
much greater in rich than in poor countries, but
bears a much greater proportion to that which is
immediately destined for constituting a revenue
either as rent or as profit. The funds destined for
the maintenance of productive labour, are not
only much greater in the former than in the lat
ter, but bear a much greater proportion to those
which, though they may be employed to main
tain either productive or unproductive hands,
have generally a predilection for the latter.

The proportion between those different funds
necessarily determines in every country the ge
neral character of the inhabitants as to industry
or idleness. We are more industrious than our

10 THE NATU11E AND CAUSES OF BOOK II.

forefathers ; because in the present times the
funds destined for the maintenance of industry,
are much greater in proportion to those which
are likely to be employed in the maintenance of
idleness, than they were two or three centuries
ago. Our ancestors were idle for want of a suffi
cient encouragement to industry. It is better,
says the proverb, to play for nothing, than to
work for nothing. In mercantile and manufac
turing towns, where the inferior ranks of people
are chiefly maintained by the employment of ca
pital, they are in general industrious, sober, and
thriving ; as in many English, and in most Dutch
towns. In those towns which are principally
supported by the constant or occasional residence
of a court, and in which the inferior ranks of
people are chiefly maintained by the spreading of
revenue, they are in general idle, dissolute, and
poor ; as at Rome, Versailles, Compeigne, and
Fontainbleau. If you except Rouen and Bour-
deaux, there is little trade or industry in any of
the parliament towns of France, and the inferior
ranks of people, being chiefly maintained by the
expense of the members of the courts of justice,
and of those who come to plead before them, are
in general idle and poor. The great trade of
Rouen and Bourdeaux seems to be altogether the
effect of their situation. Rouen is necessarily
the entrepot of almost all the goods which are
brought either from foreign countries, or from
the maritime provinces of France, for the con
sumption of the great city of Paris. Bourdeaux
is in the same manner the entrepot of the wines

CHAP. HI. THE WEALTH OF NATIONS. 11

which grow upon the banks of the Garonne, and
of the rivers which run into it, one of the richest
wine countries in the world, and which seems to
produce the wine fittest for exportation, or best
suited to the taste of foreign nations. Such ad
vantageous situations necessarily attract a great
capital by the great employment which they af
ford it ; and the employment of this capital is the
cause of the industry of those two cities. In the
other parliament towns of France, very little
more capital seems to be employed than what is
necessary for supplying their own consumption ;
that is, little more than the smallest capital
which can be employed in them. The same
thing may be said of Paris, Madrid, and Vienna.
Of those three cities, Paris is by far the most in
dustrious : but Paris itself is the principal mar
ket of all the manufactures established at Paris,
and its own consumption is the principal object
of all the trade which it carries on. London,
Lisbon, and Copenhagen, are, perhaps, the only
three cities in Europe, which are both the con
stant residence of a court, and can at the same
time be considered as trading cities, or as cities
which trade not only for their own consumption,
but for that of other cities and countries. The
situation of all the three is extremely advantage
ous, and naturally fits them to be the entrep6ts
of a great part of the goods destined for the
consumption of distant places. In a city where
a great revenue is spent, to employ with ad
vantage a capital for any other purpose than
for supplying the consumption of that city, is

12 THE NATURE AND CAUSES OF BOOK II.

probably more difficult than in one in which the
inferior ranks of people have no other mainte
nance but what they derive from the employment
of such a capital. The idleness of the greater
part of the people who are maintained by the
expense of revenue, corrupts, it is probable, the
industry of those who ought to be maintained by
the employment of capital, and renders it less
advantageous to employ a capital there than in
other places. There was little trade or industry in
Edinburgh before the Union. When the Scotch
parliament was no longer to be assembled in it,
when it ceased to be the necessary residence of
the principal nobility and gentry of Scotland, it
became a city of some trade and industry. It
still continues, however, to be the residence of
the principal courts of justice in Scotland, of the
boards of customs and excise, &c. A consider
able revenue, therefore, still continues to be spent
in it. In trade and industry it is much inferior
to Glasgow, of which the inhabitants are chiefly
maintained by the employment of capital. The
inhabitants of a large village, it has sometimes
been observed, after having made considerable
progress in manufactures, have become idle
and poor, in consequence of a great lord's
having taken up his residence in their neigh
bourhood.

The proportion between capital and revenue,
therefore, seems every where to regulate the pro
portion between industry and idleness. Where-
ever capital predominates, industry prevails :
wherever revenue, idleness. Every increase or

CHAP. ill. THE WEALTH OF NATIONS. 18

diminution of capital, therefore, naturally tends
to increase or diminish the real quantity of in
dustry, the number of productive hands, and
consequently the exchangeable value of the an
nual produce of the land and labour of the coun
try, the real wealth and revenue of all its inha
bitants.

Capitals are increased by parsimony, and di
minished by prodigality and misconduct.

Whatever a person saves from his revenue he
adds to his capital, and either employs it him
self in maintaining an additional number of pro
ductive hands, or enables some other person to
do so, by lending it to him for an interest, that
is, for a share of the profits. As the capital of
an individual can be increased only by what he
saves from his annual revenue or his annual
gains, so the capital of a society, which is the
same with that of all the individuals who com
pose it, can be increased only in the same
manner.

Parsimony, and not industry, is the imme
diate cause of the increase of capital. Industry,
indeed, provides the subject which parsimony
accumulates. But whatever industry might ac
quire, if parsimony did not save and store up,
the capital would never be the greater.

Parsimony, by increasing the fund which is
destined for the maintenance of productive
hands, tends to increase the number of those
hands whose labour adds to the value of the sub
ject upon which it is bestowed. It tends there
fore to increase the exchangeable value of the

14 THE NATURE AND CAUSES OF BOOK II.

annual produce of the land and labour of the
country. It puts into motion an additional
quantity of industry, which gives an additional
value to the annual produce.

What is annually saved is as regularly con
sumed as what is annually spent, and nearly in
the same time too ; but it is consumed by a dif
ferent set of people. That portion of his re
venue which a rich man annually spends, is in
most cases consumed by idle guests, and menial
servants, who leave nothing behind them in re
turn for their consumption. That portion which
he annually saves, as for the sake of the profit it
is immediately employed as a capital, is con
sumed in the same manner, and nearly in the
same time too, but by a different set of people,
by labourers, manufacturers, and artificers, who
re-produce with a profit the value of their an
nual consumption. His revenue, we shall sup
pose, is paid him in money. Had he spent the
whole, the food, clothing, and lodging, which
the whole could have purchased, would have
been distributed among the former set of people.
By saving a part of it, as that part is for the
sake of the profit immediately employed as a
capital either by himself or by some other per
son, the food, clothing, and lodging, which may
be purchased with it are necessarily reserved for
the latter. The consumption is the same, but
the consumers are different.

By what a frugal man annually saves, he not
only affords maintenance to an additional num
ber of productive hands, for that or the ensuing

CHAP. III. THE WEALTH OF NATIONS. 15

year, but, like the founder of a public work
house, he establishes as it were a perpetual fund
for the maintenance of an equal number in all
times to come. The perpetual allotment and
destination of this fund, indeed, is not always
guarded by any positive law, by any trust-right
or deed of mortmain. It is always guarded,
however, by a very powerful principle, the plain
and evident interest of every individual to whom
any share of it shall ever belong. No part of it
can ever afterwards be employed to maintain any
but productive hands, without an evident loss
to the person who thus perverts it from its pro
per destination.

The prodigal perverts it in this manner. By
not confining his expense within his income, he
encroaches upon his capital. Like him who
perverts the revenues of some pious foundation
to profane purposes, he pays the wages of idle
ness with those funds which the frugality of his
forefathers had, as it were, consecrated to the
maintenance of industry. By diminishing the
funds destined for the employment of pro
ductive labour he necessarily diminishes, so far
as it depends upon him, the quantity of that
labour which adds a value to the subject upon
which it is bestowed, and, consequently, the
value of the annual produce of the land and
labour of the whole country, the real wealth
and revenue of its inhabitants. If the prodi
gality of some were not compensated by the
frugality of others, the conduct of every pro
digal, by feeding the idle with the bread of the

16 THE NATURE AND CAUSES OF BOOK II,

industrious, tends not only to beggar himself,
but to impoverish his country.

Though the expense of the prodigal should
be altogether in home-made, and no part of it
in foreign commodities, its effect upon the pro
ductive funds of the society would still be the
same. Every year there would still be a certain
quantity of food and clothing, which ought to
have maintained productive, employed in main,
taming unproductive hands. Every year, there
fore, there would still be some diminution in
what would otherwise have been the value of
the annual produce of the land and labour of
the country.

This expense, it may be said indeed, not be
ing in foreign goods, and not occasioning any
exportation of gold and silver, the same quantity
of money would remain in the country as before.
But if the quantity of food and clothing, which
were thus consumed by unproductive, had been
distributed among productive hands, they would
have re-produced, together with a profit, the full
value of their consumption. The same quantity
of money would in this case equally have re
mained in the country, and there would besides
have been a re-production of an equal value of
consumable goods. There would have been two
values instead of one.

The same quantity of money, besides, cannot
long remain in any country in which the value
of the annual produce diminishes. The sole use
of money is to circulate consumable goods. By
means of it, provisions, materials, and finished

CHAP. in. THE WEALTH OF NATIONS. 17

work, are bought and sold, and distributed to
their proper consumers. The quantity of money,
therefore, which can be annually employed in
any country, must be determined by the value of
the consumable goods annually circulated within
it. These must consist either in the immediate
produce of the land and labour of the country
itself, or in something which had been purchased
with some part of that produce. Their value,
therefore, must diminish as the value of that pro
duce diminishes, and along with it the quantity
of money which can be employed in circulating
them. But the money which by this annual
diminution of produce is annually thrown out
of domestic circulation, will not be allowed to
lie idle. The interest of whoever possesses it,
requires that it should be employed. But having
no employment at home, it will, in spite of all
laws and prohibitions, be sent abroad, and em
ployed in purchasing consumable goods which
may be of some use at home. Its annual export
ation will in this manner continue for some time
to add something to the annual consumption of
the country beyond the value of its own annual
produce. What in the days of its prosperity had
been saved from that annual produce, and em
ployed in purchasing gold and silver, will contri
bute, for some little time, to support its consump
tion in adversity. The exportation of gold and
silver is, in this case, not the cause, but the effect
of its declension, and may even, for some little
time, alleviate the misery of that declension.

VOL. II. C

18 THE NATURE AND CAUSES OF BOOK II.

The quantity of money, on the contrary, must
in every country naturally increase as the value
of the annual produce increases. The value of
the consumable goods annually circulated within
the society being greater, will require a greater
quantity of money to circulate them. A part of
the increased produce, therefore, will naturally
be employed in purchasing, wherever it is to be
had, the additional quantity of gold and silver
necessary for circulating the rest. The increase
of those metals will in this case be the effect, not
the cause, of the public prosperity. Gold and
silver are purchased every where in the same
manner. The food, clothing, and lodging, the
revenue and maintenance of all those whose la
bour or stock is employed in bringing them from
the mine to the market, is the price paid for
them in Peru as well as in England. The coun
try, which has this price to pay, will never be
long without the quantity of those metals which
it has occasion for ; and no country will ever
long retain a quantity which it has no occasion
for.

Whatever, therefore, we may imagine the
real wealth and revenue of a country to consist
in, whether in the value of the annual produce
of its land and labour, as plain reason seems to
dictate, or in the quantity of the precious metals
which circulate within it, as vulgar prejudices
suppose, in either view of the matter, every pro
digal appears to be a public enemy, and every
frugal man a public benefactor.

CHAP. in. THE WEALTH OF NATIONS. 19

The effects of misconduct are often the same
as those of prodigality. Every injudicious and
unsuccessful project in agriculture, mines, fish
eries, trade, or manufactures, tends in the same
manner to diminish the funds destined for the
maintenance of productive labour. In every such
project, though the capital is consumed by pro
ductive hands only, yet, as by the injudicious
manner in which they are employed, they do not
reproduce the full value of their consumption,
there must always be some diminution in what
would otherwise have been the productive funds
of the society.

It can seldom happen, indeed, that the cir
cumstances of a great nation can be much affected
either by the prodigality or misconduct of indi
viduals ; the profusion or imprudence of some
being always more than compensated by the fru
gality and good conduct of others.

With regard to profusion, the principle which
prompts to expense, is the passion for present en
joyment; which, though sometimes violent and
very difficult to be restrained, is in general only
momentary and occasional. But the principle
which prompts to save, is the desire of better
ing our condition, a desire which, though gene
rally calm and dispassionate, comes with us
from the womb, and never leaves us till we go
into the grave. In the whole interval which se
parates those two moments, there is scarce per
haps a single instance in which any man is so per
fectly and completely satisfied with his situation,
as to be without any wish of alteration or im-

20 THE NATURE AND CAUSES OF BOOK II.

provement of any kind. An augmentation of
fortune is the means by which the greater part
of men propose and wish to better their condi
tion. It is the means the most vulgar and the
most obvious ; and the most likely way of aug
menting their fortune, is to save and accumulate
some part of what they acquire, either regularly
and annually, or upon some extraordinary occa
sions. Though the principle of expense, there
fore, prevails in almost all men upon some occa
sions, and in some men upon almost all occasions,
yet in the greater part of men, taking the whole
course of their life at an average, the principle of
frugality seems not only to predominate, but to
predominate very greatly.

With regard to misconduct, the number of pru
dent and successful undertakings is every where
much greater than that of injudicious and unsuc
cessful ones. After all our complaints of the
frequency of bankruptcies, the unhappy men
who fall into this misfortune make but a very
small part of the whole number engaged in trade,
and all other sorts of business ; not much more
perhaps than one in a thousand. Bankruptcy is
perhaps the greatest and most humiliating cala
mity which can befal an innocent man. The
greater part of men, therefore, are sufficiently
careful to avoid it. Some, indeed, do not avoid
it ; as some do not avoid the gallows.

Great nations are never impoverished by
private, though they sometimes are by public
prodigality and misconduct. The whole, or
almost the whole public revenue, is in most

CHAP. III. THE WEALTH OF NATIONS. 21

countries employed in maintaining unproductive
hands. Such are the people who compose a nu
merous and splendid court, a great ecclesiastical
establishment, great fleets and armies, who in
time of peace produce nothing, and in time of
war acquire nothing which can compensate the
expense of maintaining them, even while the war
lasts. Such people, as they themselves produce
nothing, are all maintained by the produce of
other men's labour. When multiplied, there
fore, to an unnecessary number, they may in a
particular year consume so great a share of this
produce, as not to leave a sufficiency for main
taining the productive labourers, who should re
produce it next year. The next year's produce,
therefore, will be less than that of the foregoing,
and if the same disorder should continue, that of
the third year will be still less than that of the
second. Those unproductive hands, who should
be maintained by a part only of the spare re
venue of the people, may consume so great a
share of their whole revenue, and thereby oblige
so great a number to encroach upon their capi
tals, upon the funds destined for the mainte
nance of productive labour, that all the frugality
and good conduct of individuals may not be able
to compensate the waste and degradation of pro
duce occasioned by this violent and forced en
croachment.

This frugality and good conduct, however,
is upon most occasions, it appears from expe
rience, sufficient to compensate, not only the
private prodigality and misconduct of indivi-

22 THE NATURE AND CAUSES OF BOOK II.

duals, but the public extravagance of govern
ment. The uniform, constant, and uninter
rupted effort of every man to better his condi
tion, the principle from which public and na
tional, as well as private opulence is originally
derived, is frequently powerful enough to main
tain the natural progress of things toward im
provement, in spite both of the extravagance of
government, and of the greatest errors of admi
nistration. Like the unknown principle of ani
mal life, it frequently restores health and vigour
to the constitution, in spite not only of the
disease, but of the absurd prescriptions of the
doctor.

The annual produce of the land and labour of
any nation can be increased in its value by no
other means, but by increasing either the num
ber of its productive labourers, or the productive
powers of those labourers who had before been
employed. The number of its productive la
bourers, it is evident, can never be much in
creased, but in consequence of an increase of
capital, or of the funds destined for maintaining
them. The productive powers of the same num
ber of labourers cannot be increased, but in con
sequence either of some addition and improve
ment to those machines and instruments which
facilitate and abridge labour ; or of a more pro
per division and distribution of employment. In
either case an additional capital is almost always
required. It is by means of an additional capital
only, that the undertaker of any work can either
provide his workmen with better machinery, or

CHAP. III. THE WEALTH OF NATIONS. 23

make a more proper distribution of employment
among them. When the work to be done con
sists of a number of parts, to keep every man
constantly employed in one way, requires a much
greater capital than where every man is occasion
ally employed in every different part of the work.
When we compare, therefore, the state of a na
tion at two different periods, and find, that the
annual produce of its land and labour is evidently
greater at the latter than at the former, that its
lands are better cultivated, its manufactures more
numerous and more flourishing, and its trade
more extensive, we may be assured that its capi
tal must have increased during the interval be
tween those two periods, and that more must
have been added to it by the good conduct of
some, than had been taken from it either by the
private misconduct of others, or by the public
extravagance of government. But we shall find
this to have been the case of almost all nations,
in all tolerably quiet and peaceable times, even
of those who have not enjoyed the most prudent
and parsimonious governments. To form a right
judgment of it, indeed, we must compare the
state of the country at periods somewhat distant
from one another. The progress is frequently
so gradual, that at near periods, the improve
ment is not only not sensible, but from the de
clension either of certain branches of industry, or
of certain districts of the country, things which
sometimes happen though the country in general
be in great prosperity, there frequently arises a

24 THE NATURE AND CAUSES OF BOOK II.

suspicion, that the riches and industry of the
whole are decaying.

The annual produce of the land and labour of
England, for example, is certainly much greater
than it was, a little more than a century ago at
the restoration of Charles II. Though, at pre
sent, few people, I believe, doubt of this, yet
during this period, five years have seldom passed
away in which some book or pamphlet has not
been published, written too with such abilities
as to gain some authority with the public, and
pretending to demonstrate that the wealth of the
nation was fast declining, that the country was
depopulated, agriculture neglected, manufac
tures decaying, and trade undone. Nor have
these publications been all party pamphlets, the
wretched offspring of falsehood and venality.
Many of them have been written by very candid
and very intelligent people ; who wrote nothing
but what they believed, and for no other reason
but because they believed it.

The annual produce of the land and labour of
England again was certainly much greater at the
restoration than we can suppose it to have been
about an hundred years before, at the accession of
Elizabeth. At this period too, we have all rea
son to believe, the country was much more ad
vanced in improvement, than it had been about a
century before, towards the close of the dissen
sions between the houses of York and Lancaster.
Even then it was, probably, in a better condition
than it had been at the Norman conquest, and at

CHAP. II. THE WEALTH OF NATIONS. 25

the Norman conquest, than during the confusion
of the Saxon Heptarchy. Even at this early
period, it was certainly a more improved coun
try than at the invasion of Julius Caesar, when
its inhabitants were nearly in the same state with
the savages in North America.

In each of those periods, however, there was
not only much private and public profusion,
many expensive and unnecessary wars, great per
version of the annual produce from maintaining
productive to maintain unproductive hands ; but
sometimes, in the confusion of civil discord, such
absolute waste and destruction of stock, as might
be supposed, not only to retard, as it certainly
did, the natural accumulation of riches, but to
have left the country, at the end of the period,
poorer than at the beginning. Thus, in the hap
piest and most fortunate period of them all, that
which has passed since the restoration, how many
disorders and misfortunes have occurred, which,
could they have been foreseen, not only the im
poverishment, but the total ruin of the country
would have been expected from them ? The fire
and the plague of London, the two Dutch wars,
the disorders of the revolution, the war in Ireland,
the four expensive French wars of 1688, 1702,
1742, and 17^6, together with the two rebel
lions of 1715, and 1745. In the course of the
four French wars, the nation has contracted more
than a hundred and forty-five millions of debt,
over and above all the other extraordinary an
nual expense which they occasioned, so that the
whole cannot be computed at less than two him-

26 THE NATURE AND CAUSES OF BOOK II.

dred millions. So great a share of the annual
produce of the land and labour of the country,
has, since the revolution, been employed upon
different occasions, in maintaining an extraordi
nary number of unproductive hands. But had
not those wars given this particular direction to
so large a capital, the greater part of it would
naturally have been employed in maintaining
productive hands, whose labour would have re
placed, with a profit, the whole value of their
consumption. The value of the annual produce
of the land and labour of the country, would have
been considerably increased by it every year, and
every year's increase would have augmented still
more that of the following year. More houses
would have been built, more lands would have
been improved, and those which had been im
proved before would have been better cultivated,
more manufactures would have been established,
and those which had been established before
would have been more extended ; and to what
height the real wealth and revenue of the coun
try might, by this time, have been raised, it is
not perhaps very easy even to imagine.

But though the profusion of government must,
undoubtedly, have retarded the natural progress
of England towards wealth and improvement, it
has not been able to stop it. The annual pro
duce of its land and labour is, undoubtedly,
much greater at present than it was either at the
restoration or at the revolution. The capital,
therefore, annually employed in cultivating this
land, and in maintaining this labour, must like-

CHAP. III. THE WEALTH OF NATIONS. 27

wise be much greater. In the midst of all the
exactions of government, this capital has been
silently and gradually accumulated by the pri
vate frugality and good conduct of individuals,
by their universal, continual, and uninterrupted
effort to better their own condition. It is this
effort, protected by law and allowed by liberty to
exert itself in the manner that is most advan
tageous, which has maintained the progress of
England towards opulence and improvement in
almost all former times, and which, it is to be
hoped, will do so in all future times. England,
however, as it has never been blessed with a very
parsimonious government, so parsimony has at
no time been the characteristical virtue of its in-
habitants. It is the highest impertinence and
presumption, therefore, in kings and ministers,
to pretend to watch over the oeconomy of private
people, and to restrain their expense, either by
sumptuary laws, or by prohibiting the importa
tion of foreign luxuries. They are themselves
always, and without any exception, the greatest
spendthrifts in the society. Let them look well
after their own expense, and they may safely
trust private people with theirs. If their own
extravagance does not ruin the state, that of
their subjects never will.

As frugality increases, and prodigality dimi
nishes the public capital, so the conduct of those
whose expense just equals their revenue, without
either accumulating or encroaching, neither in
creases nor diminishes it. Some modes of ex
pense, however, seem to contribute more to the
growth of public opulence than others.

28 THE NATURE AND CAUSES OF BOOK II.

The revenue of an individual may be spent
either in things which are consumed immediately,
and in which one day's expense can neither alle
viate nor support that of another ; or it may be
spent in things more durable, which can there
fore be accumulated, and in which every day's
expense may, as he chooses, either alleviate or
support and heighten the effect of that of the fol
lowing day. A man of fortune, for example,
may either spend his revenue in a profuse and
sumptuous table, and in maintaining a great
number of menial servants, and a multitude of
dogs and horses ; or contenting himself with a
frugal table and few attendants, he may lay out
the greater part of it in adorning his house or his
country villa, in useful or ornamental buildings,
in useful or ornamental furniture, in collecting
books, statues, pictures ; or in things more fri
volous, jewels, baubles, ingenious trinkets of
different kinds ; or what is most trifling of all,
in amassing a great wardrobe of fine clothes, like
the favourite and minister of a great prince who
died a few years ago. Were two men of equal
fortune to spend their revenue, the one chiefly in
the one way, the other in the other, the magnifi
cence of the person whose expense had been
chiefly in durable commodities, would be con
tinually increasing, every day's expense contri
buting something to support and heighten the
effect of that of the following day ; that of the
other, on the contrary, would be no greater at
the end of the period than at the beginning.
The former too would, at the end of the period,
be the richer man of the two. He would have

CHAP. III. THE WEALTH OF NATIONS. 29

a stock of goods of some kind or other, which,
though it might not be worth all that it cost,
would always be worth something. No trace
or vestige of the expense of the latter would
remain, and the effects of ten or twenty years
profusion would be as completely annihilated as
if they had never existed.

As the one mode of expense is more favour-
able than the other to the opulence of an indivi
dual, so it is likewise to that of a nation. The
houses, the furniture, the clothing of the rich,
in a little time, become useful to the inferior and
middling ranks of people. They are able to
purchase them when their superiors grow weary
of them, and the general accommodation of the
whole people is thus gradually improved, when
this mode of expense becomes universal among
men of fortune. In countries which have long
been rich, you will frequently find the inferior
ranks of people in possession both of houses and
furniture perfectly good and entire, but of which
neither the one could have been built, nor the
other have been made for their use. What was
formerly a seat of the family of Seymour, is now
an inn upon the Bath road. The marriage-bed
of James the First of Great Britain, which his
Queen brought with her from Denmark, as a
present fit for a sovereign to make to a sovereign,
was, a few years ago, the ornament of an ale
house at Dunfermline. In some ancient cities,
which either have been long stationary, or have
gone somewhat to decay, you will sometimes
scarce find a single house which could have been

30 THE NATURE AND CAUSES OF HOOK IT.

built for its present inhabitants. If you go into
those houses too, you will frequently find many
excellent, though antiquated pieces of furniture,
which are still very fit for use, and which could
as little have been made for them. Noble pa
laces, magnificent villas, great collections of
books, statues, pictures, and other curiosities, are
frequently both an ornament and an honour, not
only to the neighbourhood, but to the whole
country to which they belong. Versailles is an
ornament and an honour to France, Stowe and
Wilton to England. Italy still continues to
command some sort of veneration by the number
of monuments of this Ikind which it possesses,
though the wealth which produced them has
decayed, and though the genius which planned
them seems to be extinguished, perhaps from not
having the same employment.

The expense too which is laid out in durable
commodities, is favourable not only to accumu
lation, but to frugality. If a person should at
any time exceed in it, he can easily reform with
out exposing himself to the censure of the pub
lic. To reduce very much the number of his
servants, to reform his table from great profusion
to great frugality, to lay down his equipage after
he has once set it up, are changes which cannot
escape the observation of his neighbours, and
which are supposed to imply some acknowledg
ment of preceding bad conduct. Few, there
fore, of those who have once been so unfortunate
as to launch out too far into this sort of expense,
have afterwards the courage to reform, till ruin

CHAP. III. THE WEALTH OF NATIONS. 31

and bankruptcy oblige them. But if a person
has, at any time, been at too great an expense in
building, in furniture, in books or pictures, no
imprudence can be inferred from his changing
his conduct. These are things in which further
expense is frequently rendered unnecessary by
former expense ; and when a person stops short,
he appears to do so, not because he has ex
ceeded his fortune, but because he has satisfied
his fancy.

The expense, besides, that is laid out in dura
ble commodities, gives maintenance, commonly,
to a greater number of people, than that which
is employed in the most profuse hospitality. Of
two or three hundred weight of provisions, whicli
may sometimes be served up at a great festival,
one-half, perhaps, is thrown to the dunghill, and
there is always a great deal wasted and abused.
But if the expense of this entertainment had been
employed in setting to work masons, carpenters,
upholsterers, mechanics, &c. a quantity of pro
visions of equal value would have been distri
buted among a still greater number of people,
who would have bought them in penny-worths
and pound weights, and not have lost nor thrown
away a single ounce of them. In the one way,
besides, this expense maintains productive, in
the other unproductive hands. In the one way,
therefore, it increases, in the other, it does not
increase, the exchangeable value of the annual
produce of the land and labour of the country.
I would not, however, by all this be under
stood to mean, that the one species of expense

32 THE NATURE AND CAUSES OF BOOK II.

always betokens a more liberal or generous spirit
than the other. When a man of fortune spends
his revenue chiefly in hospitality, he shares the
greater part of it with his friends and compa
nions ; but when he employs it in purchasing
such durable commodities, he often spends the
whole upon his own person, and gives nothing to
any body without an equivalent. The latter
species of expense, therefore, especially when di
rected towards frivolous objects, the little orna
ments of dress and furniture, jewels, trinkets,
gewgaws, frequently indicates, not only a trifling,
but a base and selfish disposition. All that I
mean is, that the one sort of expense, as it always
occasions some accumulation of valuable com
modities, as it is more favourable to private fru
gality, and, consequently, to the increase of the
public capital, and as it maintains productive,
rather than unproductive hands, conduces more
than the other to the growth of public opu
lence.

CHAP. IV. THE WEALTH OF NATIONS. 33

CHAPTER IV.

Of Stock lent at Interest.

THE stock which is lent at interest is always
considered as a capital by the lender. He ex
pects that in due time it is to be restored to
him, and that in the mean time the borrower is
to pay him a certain annual rent for the use of
it. The borrower may use it either as a capital,
or as a stock reserved for immediate consump
tion. If he uses it as a capital, he employs it
in the maintenance of productive labourers, who
reproduce the value with a profit. He can, in
this case, both restore the capital and pay the
interest without alienating or encroaching upon
any other source of revenue. If he uses it as a
stock reserved for immediate consumption, he
acts the part of a prodigal, and dissipates in the
maintenance of the idle, what was destined for
the support of the industrious. He can, in this
case, neither restore the capital nor pay the in
terest, without either alienating or encroaching
upon some other source of revenue, such as the
property or the rent of land.

The stock which is lent at interest is, no doubt,
occasionally employed in both these ways, but
in the former much more frequently than in the
latter. The man who borrows in order to spend
will soon be ruined, and he who lends to him
will generally have occasion to repent of his

VOL. II. D

34* THE NATURE AND CAUSES OF BOOK II.

folly. To borrow or to lend for such a purpose,
therefore, is in all cases, where gross usury is
out of the question, contrary to the interest of
both parties ; and though it no doubt happens
sometimes that people do both the one and the
other ; yet, from the regard that all men have
for their own interest, we may be assured that
it cannot happen so very frequently as we are
sometimes apt to imagine. Ask any rich man of
common prudence, to which of the two sorts of
people he has lent the greater part of his stock,
to those who, he thinks, will employ it profitably,
or to those who will spend it idly, and he will
laugh at you for proposing the question. Even
among borrowers, therefore, not the people in
the world most famous for frugality, the number
of the frugal and industrious surpasses consider
ably that of the prodigal and idle.

The only people to whom stock is commonly
lent, without their being expected to make any
very profitable use of it, are country gentlemen
who borrow upon mortgage. Even they scarce
ever borrow merely to spend. What they bor
row, one may say, is commonly spent before
they borrow it. They have generally consumed
so great a quantity of goods, advanced to them
upon credit by shopkeepers and tradesmen, that
they find it necessary to borrow at interest in
order to pay the debt. The capital borrowed
replaces the capitals of those shopkeepers and
tradesmen, which the country gentlemen could
not have replaced from the rents of their estates.
It is not properly borrowed in order to be spent,

CHAP. IV. THE WEALTH OF NATIONS. 35

but in order to replace a capital which had been
spent before.

Almost all loans at interest are made in money,
either of paper, or of gold and silver. But what
the borrower really wants, and what the lender
really supplies him with, is not the money, but
the money's worth, or the goods which it can
purchase. If he wants it as a stock for imme
diate consumption, it is those goods only which
he can place in that stock. If he wants it as a
capita] for employing industry, it is from those
goods only that the industrious can be furnished
with the tools, materials, and maintenance, ne
cessary for carrying on their work. By means
of the loan, the lender, as it were, assigns to the
borrower his right to a certain portion of the
annual produce of the land and labour of the
country, to be employed as the borrower pleases.

The quantity of stock, therefore, or, as it is
commonly expressed, of money, which can be
lent at interest in any country, is not regulated
by the value of the money, whether paper or
coin, which serves as the instrument of the dif
ferent loans made in that country, but by the
value of that part of the annual produce, which,
as soon as it comes either from the ground, or
from the hands of the productive labourers, is
destined not only for replacing a capital, but
such a capital as the owner does not care to be
at the trouble of employing himself. As such
capitals are commonly lent out and paid back in
money, they constitute what is called the monied
interest. It is distinct, not only from the landed,

D 2

36 THE NATURE AND CAUSES OF BOOK II.

but from the trading and manufacturing inte
rests, as in these last the owners themselves em
ploy their own capitals. Even in the monied
interest, however, the money is, as it were, but
the deed of assignment, which conveys from one
hand to another those capitals which the owners
do not care to employ themselves. Those capitals
may be greater in almost any proportion, than
the amount of the money which serves as the
instrument of their conveyance ; the same pieces
of money successively serving for many different
loans, as well as for many different purchases.
A, for example, lends to W a thousand pounds,
with which W immediately purchases of B a
thousand pounds worth of goods. B having no
occasion for the money himself, lends the iden
tical pieces to X, with which X immediately
purchases of C another thousand pounds worth
of goods. C, in the same manner, and for the
same reason, lends them to Y, who again pur
chases goods with them of D. In this manner
the same pieces, either of coin or of paper, may,
in the course of a few days, serve as the instru
ment of three different loans, and of three dif
ferent purchases, each of which is, in value,
equal to the whole amount of those pieces. What
the three monied men, A, B, and C, assign to the
three borrowers, W, X, Y, is the power of making
those purchases. In this power consist both
the value and the use of the loans. The stock
lent by the three monied men is equal to the
value of the goods which can be purchased with
it, and is three times greater than that of the

CHAP. IV. THE WEALTH OF NATIONS. 37

money with which the purchases are made.
Those loans, however, may be all perfectly well
secured, the goods purchased by the different
debtors being so employed, as in due time to
bring back, with a profit, an equal value either
of coin or of paper. And as the same pieces of
money can thus serve as the instrument of dif
ferent loans to three, or, for the same reason, to
thirty times their value, so they may likewise suc
cessively serve as the instrument of repayment.

A capital lent at interest may, in this manner,
be considered as an assignment from the lender
to the borrower of a certain considerable portion
of the annual produce ; upon condition that the
borrower in return shall, during the continuance
of the loan, annually assign to the lender a
smaller portion, called the interest; and at the
end of it, a portion equally considerable with
that which had originally been assigned to him,
called the repayment. Though money, either
coin or paper, serves generally as the deed of
assignment both to the smaller, and to the more
considerable portion, it is itself altogether dif
ferent from what is assigned by it.

In proportion as that share of the annual pro
duce which, as soon as it comes either from the
ground or from the hands of the productive la
bourers, is destined for replacing a capital, in
creases in any country, what is called the monied
interest naturally increases with it. The in
crease of those particular capitals from which
the owners wish to derive a revenue, without
being at the trouble of employing them them
selves, naturally accompanies the general in-

38 THE NATURE AND CAUSES OF BOOK II.

crease of capitals ; or, in other words, as stock
increases, the quantity of stock to be lent at
interest grows gradually greater and greater.

As the quantity of stock to be lent at interest
increases, the interest, or the price which must
be paid for the use of that stock, necessarily dimi
nishes, not only from those general causes which
make the market price of things commonly di
minish as their quantity increases, but from other
causes which are peculiar to this particular case.
As capitals increase in any country, the profits
which can be made by employing them neces
sarily diminish. It becomes gradually more and
more difficult to find within the country a pro
fitable method of employing any new capital.
There arises in consequence a competition be
tween different capitals, the owner of one endea
vouring to get possession of that employment
which is occupied by another. But upon most
occasions he can hope to justle that other out of
this employment by no other means but by
dealing upon more reasonable terms. He must
not only sell what he deals in somewhat cheaper,
but in order to get it to sell, he must sometimes
too buy it dearer. The demand for productive
labour, by the increase of the funds which are
destined for maintaining it, grows every day
greater and greater. Labourers easily find em
ployment, but the owners of capitals find it dif
ficult to get labourers to employ. Their com
petition raises the wages of labour, and sinks the
profits of stock. But when the profits which
can be made by the use of a capital are in this
manner diminished, as it were, at both ends, the

CHAP. iv. THE WEALTH OF NATIONS. 39

price which can be paid for the use of it, that is,
the rate of interest, must necessarily be dimi
nished with them.

Mr. Locke, Mr. Law, and Mr. Montesquieu,
as well as many other writers, seem to have
imagined that the increase of the quantity of
gold and silver, in consequence of the discovery
of the Spanish West Indies, was the real cause
of the lowering of the rate of interest through
the greater part of Europe. Those metals, they
say, having become of less value themselves, the
use of any particular portion of them necessarily
became of less value too, and consequently the
price which could be paid for it. This notion,
which at first sight seems so plausible, has
been so fully exposed by Mr. Hume, that it is,
perhaps, unnecessary to say any thing more
about it. The following very short and plain
argument, however, may serve to explain more
distinctly the fallacy which seems to have misled
those gentlemen.

Before the discovery of the Spanish West In
dies, ten per cent, seems to have been the com
mon fate of interest through the greater part of
Europe. It has since that time in different
countries sunk to six, five, four, and three per
cent. Let us suppose that in every particular
country the value of silver has sunk precisely
in the same proportion as the rate of interest ;
and that in those countries, for example, where
interest has been reduced from ten to five per
cent., the same quantity of silver can now pur
chase just half the quantity of goods which it

40 THE NATURE AND CAUSES OF BOOK II.

could have purchased before. This supposition
will not, I believe, be found any where agree
able to the truth, but it is the most favourable
to the opinion which we are going to examine ;
and even upon this supposition it is utterly im
possible that the lowering of the value of silver
could have the smallest tendency to lower the
rate of interest. If a hundred pounds are in
those countries now of no more value than fifty
pounds were then, ten pounds must now be of
no more value than five pounds were then. What
ever were the causes which lowered the value
of the capital, the same must necessarily have
lowered that of the interest, and exactly in the
same proportion. The proportion between the
value of the capital and that of the interest must
have remained the same, though the rate had
never been altered. By altering the rate, on
the contrary, the proportion between those two
values is necessarily altered. If a hundred pounds
now are w^orth no more than fifty were then, five
pounds now can be worth no more than two
pounds ten shillings were then. By reducing
the rate of interest, therefore, from ten to five
per cent., we give for the use of a capital, which
is supposed to be equal to one-half of its former
value, an interest which is equal to one-fourth
only of the value of the former interest.

Any increase in the quantity of silver, while
that of the commodities circulated by means of
it remained the same, could have no other effect
than to diminish the value of that metal. The
nominal value of all sorts of goods would be

CHAP. IV. THE WEALTH OF NATIONS. 41

greater, but their real value would be precisely
the same as before. They would be exchanged
for a greater number of pieces of silver ; but the
quantity of labour which they could command,
the number of people whom they could maintain
and employ, would be precisely the same. The
capital of the country would be the same, though
a greater number of pieces might be requisite
for conveying any equal portion of it from one
hand to another. The deeds of assignment, like
the conveyances of a verbose attorney, would be
more cumbersome, but the thing assigned would
be precisely the same as before, and could pro
duce only the same effects. The funds for main
taining productive labour being the same, the
demand for it would be the same. Its price
or wages, therefore, though nominally greater,
would really be the same. They would be paid
in a greater number of pieces of silver ; but they
would purchase only the same quantity of goods.
The profits of stock would be the same both
nominally and really. The wages, of labour are
commonly computed by the quantity of silver
which is paid to the labourer. When that is in
creased, therefore, his wages appear to be in
creased, though they may sometimes be no
greater than before. But the profits of stock are
not computed by the number of pieces of silver
with which they are paid, but by the proportion
which those pieces bear to the whole capital em
ployed. Thus in a particular country five shillings
a week are said to be the common wages of la
bour, and ten per cent, the common profits of

42 THE NATURE AND CAUSES OF BOOK II.

stock. But the whole capital of the country
being the same as before, the competition be
tween the different capitals of individuals into
which it was divided would likewise be the same.
They would all trade with the same advantages
and disadvantages. The common proportion
between capital and profit, therefore, would be
the same, and consequently the common interest
of money ; what can commonly be given for the
use of money being necessarily regulated by what
can commonly be made by the use of it.

Any increase in the quantity of commodities
annually circulated within the country, while that
of the money which circulated them remained
the same, would, on the contrary, produce many
other important effects, besides that of raising
the value of the money. The capital of the
country, though it might nominally be the same,
would really be augmented. It might continue
to be expressed by the same quantity of money,
but it would command a greater quantity of la
bour. The quantity of productive labour which
it could maintain and employ would be increased,
and consequently the demand for that labour.
Its wages would naturally rise with the demand,
and yet might appear to sink. They might be
paid with a smaller quantity of money, but that
smaller quantity might purchase a greater quan
tity of goods than a greater had done before.
The profits of stock would be diminished both
really and in appearance. The whole capital of
the country being augmented, the competition
between the different capitals of which it was

CHAP. IV. THE WEALTH OF NATIONS. 43

composed would naturally be augmented along
with it. The owners of those particular capitals
would be obliged to content themselves with a
smaller proportion of the produce of that labour
which their respective capitals employed. The
interest of money, keeping pace always with
the profits of stock, might, in this manner, be
greatly diminished, though the value of money,
or the quantity of goods which any particular
sum could purchase, was greatly augmented.

In some countries the interest of money has
been prohibited by law. But as something can
every-where be made by the use of money,
something ought every-where to be paid for the
use of it. This regulation, instead of prevent
ing, has been found from experience to increase
the evil of usury ; the debtor being obliged to
pay, not only for the use of the money, but for
the risk which his creditor runs by accepting a
compensation for that use. He is obliged, if
one may say so, to insure his creditor from the
penalties of usury.

In countries where interest is permitted, the
law, in order to prevent the extortion of usury,
generally fixes the highest rate which can be
taken without incurring a penalty. This rate
ought always to be somewhat above the lowest
market price, or the price which is commonly
paid for the use of money by those who can give
the most undoubted security. If this legal rate
should be fixed below the lowest market rate,
the effects of this fixation must be nearly the
same as those of a total prohibition of interest.

44 THE NATURE AND CAUSES OF BOOK II.

The creditor will not lend his money for less
than the use of it is worth, and the debtor must
pay him for the risk which he runs by accepting
the full value of that use. If it is fixed precisely
at the lowest market price, it ruins, with honest
people, who respect the laws of their country,
the credit of all those who cannot give the very
best security, and obliges them to have recourse
to exorbitant usurers. In a country, such as
Great Britain, where money is lent to govern
ment at three per cent, and to private people
upon good security at four and four and a half,
the present legal rate, five per cent., is, perhaps,
as proper as any.

The legal rate, it is to be observed, though
it ought to be somewhat above, ought not to be
much above the lowest market rate. If the legal
rate of interest in Great Britain, for example,
was fixed so high as eight or ten per cent., the
greater part of the money which was to be lent
would be lent to prodigals and projectors, who
alone would be willing to give this high interest.
Sober people, who will give for the use of money
no more than a part of what they are likely to
make by the use of it, would not venture into
the competition. A great part of the capital of
the country would thus be kept out of the hands
which were most likely to make a profitable and
advantageous use of it, and thrown into those
which were most likely to waste and destroy it.
Where the legal rate of interest, on the con
trary, is fixed but a very little above the lowest
market rate, sober people are universally pre-

CHAP. IV. THE WEALTH OF NATIONS. 45

ferred, as borrowers, to prodigals and projectors.
The person who lends money gets nearly as
much interest from the former as he dares to
take from the latter, and his money is much
safer in the hands of the one set of people than
in those of the other. A great part of the capital
of the country is thus thrown into the hands in
which it is most likely to be employed with ad
vantage.

No law can reduce the common rate of in
terest below the lowest ordinary market rate at
the time when that law is made. Notwithstand
ing the edict of 1766, by which the French king
attempted to reduce the rate of interest from
five to four per cent., money continued to be
lent in France at five per cent., the law being
evaded in several different ways.

The ordinary market price of land, it is to be
observed, depends every. where upon the ordi
nary market rate of interest. The person who
has a capital from which he wishes to derive a
revenue, without taking the trouble to employ
it himself, deliberates whether he should buy
land with it, or lend it out at interest. The su
perior security of land, together with some other
advantages which almost every-where attend
upon this species of property, will generally dis
pose him to content himself with a smaller re
venue from land, than what he might have by
lending out his money at interest. These ad
vantages are sufficient to compensate a certain
difference of revenue ; but they will compensate
a certain difference only ; and if the rent of land

46 THE NATURE AND CAUSES OF BOOK II.

should fall short of the interest of money by a
greater difference, nobody would buy land,
which would soon reduce its ordinary price.
On the contrary, if the advantages should much
more than compensate the difference, every body
would buy land, which again would soon raise
its ordinary price. When interest was at ten
per cent., land was commonly sold for ten and
twelve years purchase. As interest sunk to six,
five, and four per cent., the price of land rose to
twenty, five and twenty, and thirty years pur
chase. The market rate of interest is higher in
France than in England ; and the common price
of land is lower. In England it commonly sells
at thirty, in France at twenty years purchase.

CHAPTER V.

Of the different Employment of Capitals.

THOUGH all capitals are destined for the main
tenance of productive labour only, yet the quan
tity of that labour, which equal capitals are
capable of putting into motion, varies extremely
according to the diversity of their employment ;
as does likewise the value which that employ
ment adds to the annual produce of the land
and labour of the country.

A capital may be employed in four different
ways : either, first, in procuring the rude pro
duce annually required for the use and consump-

CHAP. V. THE WEALTH OF NATIONS. 47

tion of the society, or, secondly, in manufacturing
and preparing that rude produce for immediate
use and consumption ; or, thirdly, in transport
ing either the rude or manufactured produce
from the places where they abound to those
where they are wanted ; or, lastly, in dividing
particular portions of either into such small par
cels as suit the occasional demands of those who
want them. In the first way are employed the
capitals of all those who undertake the improve
ment or cultivation of lands, mines, or fisheries ;
in the second, those of all master manufacturers ;
in the third those of all wholesale merchants ;
and in the fourth, those of all retailers. It is
difficult to conceive that a capital should be em
ployed in any way which may not be classed
under some one or other of those four.

Each of those four methods of employing a
capital is essentially necessary either to the
existence or extension of the other three, or to
the general conveniency of the society.

Unless a capital was employed in furnishing
rude produce to a certain degree of abundance,
neither manufactures nor trade of any kind
could exist.

Unless a capital was employed in manufac
turing that part of the rude produce which re
quires a good deal of preparation before it can be
fit for use and consumption, it either would never
be produced, because there could be no demand
for it ; or if it was produced spontaneously, it
would be of no value in exchange, and could
add nothing to the wealth of the society.

48 THE NATURE AND CAUSES OF BOOK II.

Unless a capital was employed in transporting,
either the rude or manufactured produce, from
the places where it abounds to those where it is
wanted, no more of either could be produced
than was necessary for the consumption of the
neighbourhood. The capital of the merchant
exchanges the surplus produce of one place for
that of another, and thus encourages the industry
and increases the enjoyments of both.

Unless a capital was employed in breaking and
dividing certain portions either of the rude or
manufactured produce, into such small parcels
as suit the occasional demands of those who want
them, every man would be obliged to purchase
a greater quantity of the goods he wanted than
his immediate occasions required. If there was
no such trade as a butcher, for example, every
man would be obliged to purchase a whole ox
or a whole sheep at a time. This would generally
be inconvenient to the rich, and much more so
to the poor. If a poor workman was obliged to
purchase a month's or six months' provisions
at a time, a great part of the stock which he
employs as a capital in the instruments of
his trade, or in the furniture of his shop, and
which yields him a revenue, he would be forced
to place in that part of his stock which is re
served for immediate consumption, and which
yields him no revenue. Nothing can be more
convenient for such a person than to be able
to purchase his subsistence from day to day, or
even from hour to hour, as he wants it. He is
thereby enabled to employ almost his whole

CHAP. v. THE WEALTH OF NATIONS. 49

stock as a capital. He is thus enabled to fur
nish work to a greater value, and the profit
which he makes by it in this way, much more
than compensates the additional price which the
profit of the retailer imposes upon the goods.
The prejudices of some political writers against
shopkeepers and tradesmen, are altogether with
out foundation. So far is it from being neces
sary either to tax them, or to restrict their num
bers, that they can never be multiplied so as to
hurt the public, though they may so as to hurt
one another. The quantity of grocery goods,
for example, which can be sold in a particular
town, is limited by the demand of that town
and its neighbourhood. The capital, therefore,
which can be employed in the grocery trade can
not exceed what is sufficient to purchase that
quantity. If this capital is divided between two
different grocers, their competition will tend to
make both of them sell cheaper, than if it were
in the hands of one only ; and if it were divided
among twenty, their competition would be just
so much the greater, and the chance of their com
bining together, in order to raise the price,
just so much the less. Their competition might
perhaps ruin some of themselves ; but to take care
of this is the business of the parties concerned,
and it may safely be trusted to their discretion.
It can never hurt either the consumer, or the
producer ; on the contrary, it must tend to make
the retailers both sell cheaper and buy dearer,
than if the whole trade was monopolized by one
or two persons. Some of them, perhaps, may
VOL. n. E

50 THE NATURE AND CAUSES OF BOOK n.

sometimes decoy a weak customer to buy what
he has no occasion for. This evil, however, is
of too little importance to deserve the public at
tention, nor would it necessarily be prevented by
restricting their numbers. It is not the multi
tude of ale-houses, to give the most suspicious
example, that occasions a general disposition to
drunkenness among the common people : but
that disposition arising from other causes neces
sarily gives employment to a multitude of ale
houses.

The persons whose capitals are employed in
any of those four ways are themselves productive
labourers. Their labour, when properly di
rected, fixes and realizes itself in the subject or
vendible commodity upon which it is bestowed,
and generally adds to its price the value at least
of their own maintenance and consumption.
The profits of the farmer, of the manufacturer,
of the merchant, and retailer, are all drawn from
the price of the goods which the two first pro
duce, and the two last buy and sell. Equal ca
pitals, however, employed in each of those four
different ways will immediately put into motion
very different quantities of productive labour,
and augment too in very different porportions
the value of the annual produce of the land and
labour of the society to which they belong.

The capital of the retailer replaces, together
with its profits, that of the merchant of whom he
purchases goods, and thereby enables him to
continue his business. The retailer himself is
the only productive labourer whom it imme-

CHAP. v. THE WEALTH OF NATIONS. 51

diately employs. In his profits consists the whole
value which its employment adds to the annual
produce of the land and labour of the society.

The capital of the wholesale merchant replaces,
together with their profits, the capitals of the
farmers and manufacturers of whom he purchases
the rude and manufactured produce which lie
deals in, and thereby enables them to continue
their respective trades. It is by this service
chiefly that he contributes indirectly to support
the productive labour of the society, and to in
crease the value of its annual produce. His ca
pital employs too the sailors and carriers who
transport his goods from one place to another,
and it augments the price of those goods by the
value, not only of his profits, but of their wages.
This is all the productive labour which it imme
diately puts into motion, and all the value which
it immediately adds to the annual produce. Its
operation in both these respects is a good deal
superior to that of the capital of the retailer.

Part of the capital of the master manufacturer
is employed as a fixed capital in the instruments
of his trade, and replaces, together with its pro
fits, that of some other artificer of whom he pur
chases them. Part of his circulating capital is
employed in purchasing materials, and replaces,
with their profits, the capitals of the farmers and
miners of whom he purchases them. But a great
part of it is always, either annually, or in a much
shorter period, distributed among the different
workmen whom he employs. It augments the
value of those materials by their wages, and by

E 2

52 THE NATUBfi AND CAUSES OF BOOK II.

their masters' profits upon the whole stock of
wages, materials, and instruments of trade em
ployed in the business. It puts immediately into
motion, therefore, a much greater quantity of
productive labour, and adds a much greater value
to the annual produce of the land and labour of
the society, than an equal capital in the hands
of any wholesale merchant.

No equal capital puts into motion a greater
quantity of productive labour, than that of the
farmer. Not only his labouring servants, but
his labouring cattle, are productive labourers. In
agriculture, too, nature labours along with man ;
and though her labour costs no expense, its pro
duce has its value, as well as that of the most ex
pensive workmen. The most important opera
tions of agriculture, seem intended not so much
to increase, though they do that too, as to direct
the fertility of nature towards the production of
the plants most profitable to man. A field over
grown with briars and brambles may frequently
produce as great a quantity of vegetables as the
best cultivated vineyard or corn field. Planting
and tillage frequently regulate more than they
animate the active fertility of nature ; and after
all their labour, a great part of the work always
remains to be done by her. The labourers and
labouring cattle, therefore, employed in agri
culture, not only occasion, like the workmen in
manufactures, the reproduction of a value equal
to their own consumption, or to the capital which
employs them, together with its owners' profits ;
but of a much greater value. Over and above

CHAP. v. THE WEALTH OF NATIONS. 53

the capital of the farmer and all its profits, they
regularly occasion the reproduction of the rent of
the landlord. This rent may be considered as
the produce of those powers of nature, the use
of which the landlord lends to the farmer. It is
greater or smaller according to the supposed ex
tent of those powers, or, in other words, accord
ing to the supposed natural or improved fertility
of the land. It is the work of nature which re
mains after deducting or compensating every
thing which can be regarded as the work of man.
It is seldom less than a fourth, and frequently
more than a third of the whole produce. No
equal quantity!of productive labour employed in
manufactures can ever occasion so great a repro
duction. In them nature does nothing; man
does all ; and the reproduction must always be in
proportion to the strength of the agents that oc
casion it. The capital employed in agriculture,
therefore, not only' puts into motion a greater
quantity of productive labour than any equal
capital employed in manufactures, but in pro
portion too to the quantity of productive labour
which it employs, it adds a much greater value
to the annual produce of the land and labour of
the country, to the real wealth and revenue of its
inhabitants. Of all the ways in which a capital
can be employed, it is by far the most advan
tageous to the society.

The capitals employed in the agriculture and
in the retail trade of any society, must always
reside within that society. Their employment is
confined almost to a precise spot, to the farm,

54 THE NATURE AND CAUSES OF BOOK II.

and to the shop of the retailer. They must gene
rally too, though there are some exceptions to
this, belong to resident members of the society.

The capital of a wholesale merchant, on the
contrary, seems to have no fixed or necessary re
sidence any-where, but may wander about from
place to place, according as it can either buy
cheap or sell dear.

The capital of the manufacturer must no doubt
reside where the manufacture is carried on : but
where this shall be is not always necessarily deter
mined. It may frequently be at a great distance
both from the place where the materials grow,
and from that where the complete manufacture
is consumed. Lyons is very distant both from
the places which afford the materials of its ma
nufactures, and from those which consume them.
The people of fashion in Sicily are clothed in
silks made in other countries, from the mate
rials which their own produces. Part of the
wool of Spain is manufactured in Great Britain,
and some part of that cloth is afterwards sent
back to Spain.

Whether the merchant whose capital exports
the surplus produce of any society be a native or
a foreigner, is of very little importance. If he is
a foreigner, the number of their productive la
bourers is necessarily less than if he had been a
native by one man only ; and the value of their
annual produce, by the profits of that one man.
The sailors or carriers whom he employs may still
belong indifferently either to his country, or to
their country, or to some third country, in the

CHAP.T. THE WEALTH OF NATIONS. 55

same manner as if he had been a native. The
capital of a foreigner gives a value to their sur
plus produce equally with that of a native, by
exchanging it for something for v/hich there is a
demand at home. It as effectually replaces the
capital of the person who produces that surplus,
and as effectually enables him to continue his
business, the service by which the capital of a
wholesale merchant chiefly contributes to sup
port the productive labour, and to augment the
value of the annual produce of the society to
which he belongs.

It is of more consequence that the capital of
the manufacturer should reside within the coun
try. It necessarily puts into motion a greater
quantity of productive labour, and adds a greater
value to the annual produce of the land and la
bour of the society. It may, however, be very
useful to the country, though it should not reside
within it. The capitals of the British manu
facturers who work up the flax and hemp annu
ally imported from the coasts of the Baltic, are
surely very useful to the countries which produce
them. Those materials are a part of the surplus
produce of those countries which, unless it was
annually exchanged for something which is in
demand there, would be of no value, and would
soon cease to be produced. The merchants who
export it, replace the capitals of the people who
produce it, and thereby encourage them to
continue the production ; and the British ma
nufacturers replace the capitals of those mer
chants.

56 THE NATURE AND CAUSES OF BOOK II.

A particular country, in the same manner
as a particular person, may frequently not have
capital sufficient both to improve and cultivate
all its lands, to manufacture and prepare their
whole rude produce for immediate use and con
sumption, and to transport the surplus part either
of the rude or manufactured produce to those
distant markets where it can be exchanged for
something for which there is a demand at home.
The inhabitants of many different parts of Great
Britain have not capital sufficient to improve and
cultivate all their lands. The wool of the south
ern counties of Scotland is, a great part of it,
after a long land-carriage through very bad roads,
manufactured in Yorkshire, for want of a capital
to manufacture it at home. There are many
little manufacturing towns in Great Britain, of
which the inhabitants have not a capital sufficient
to transport the produce of their own industry to
those distant markets where there is demand and
consumption for it. If there are any merchants
among them, they are properly only the agents
of wealthier merchants, who reside in some of
the great commercial cities.

When the capital of any country is not suffi
cient for all those three purposes, in proportion
as a greater share of it is employed in agricul
ture, the greater will be the quantity of pro
ductive labour which it puts into motion within
the country ; as will likewise be the value which
its employment adds to the annual produce of
the land and labour of the society. After agri
culture, the capital employed in manufactures

CHAP. v. THE WEALTH OF NATIONS. 57

puts into motion the greatest quantity of pro
ductive labour, and adds the greatest value to
the annual produce. That which is employed
in the trade of exportation, has the least effect
of any of the three.

The country, indeed, which has not capital
sufficient for all those three purposes, has not
arrived at that degree of opulence for which it
seems naturally destined. To attempt, however,
prematurely, and with an insufficient capital, to
do all the three, is certainly not the shortest way
for a society, no more than it would be for an
individual, to acquire a sufficient one. The
capital of all the individuals of a nation, has its
limits in the same manner as that of a single in
dividual, and is capable of executing only cer
tain purposes. The capital of all the individuals
of a nation is increased in the same manner as
that of a single individual, by their continually
accumulating and adding to it whatever they save
out of their revenue. It is likely to increase the
fastest, therefore, when it is employed in the way
that affords the greatest revenue to all the inha
bitants of the country, as they will thus be en
abled to make the greatest savings. But the re
venue of all the inhabitants of the country is ne
cessarily in proportion to the value of the annual
produce of their land and labour.

It has been the principal cause of the rapid
progress of our American colonies towards wealth
and greatness, that almost their whole capitals
have hitherto been employed in agriculture
They have no manufactures, those household and

58 THE NATURE AND CAUSES OF BOOK II.

coarser manufactures excepted which necessa
rily accompany the progress of agriculture, and
which are the work of the women and children
in every private family. The greater part both
of the exportation and coasting trade of Ame
rica, is carried on by the capitals of merchants
who reside in Great Britain. Even the stores
and warehouses from which goods are retailed
in some provinces, particularly in Virginia and
Maryland, belong many of them to merchants
who reside in the mother country, and afford one
of the few instances of the retail trade of a society
being carried on by the capitals of those who are
not resident members of it. Were the Ameri
cans, either by combination or by any other sort
of violence, to stop the importation of Euro
pean manufactures, and, by thus giving a mono
poly to such of their own countrymen as could
manufacture the like goods, divert any consi
derable part of their capital into this employ
ment, they would retard instead of accelerating
the further increase in the value of their annual
produce, and would obstruct instead of promoting
the progress of their country towards real wealth
and greatness. This would be still more the case,
were they to attempt, in the same manner, to
monopolize to themselves their whole exporta
tion trade.

The course of human prosperity, indeed, seems
scarce ever to have been of so long continuance
as to enable any great country to acquire capital
sufficient for all those three purposes ; unless,
perhaps, we give credit to the wonderful ac-

CHAP. v. THE WEALTH OF NATIONS. 59

counts of the wealth and cultivation of China,
of those of ancient Egypt, and of the ancient
state of Indostan. Even those three countries,
the wealthiest, according to all accounts, that
ever were in the world, are chiefly renowned for
their superiority in agriculture and manufac
tures. They do not appear to have been emi
nent for foreign trade. The ancient Egyptians
had a superstitious antipathy to the sea ; a super
stition nearly of the same kind prevails among
the Indians ; and the Chinese have never excelled
in foreign commerce. The greater part of the
surplus produce of all those three countries seems
to have been always exported by foreigners, who
gave in exchange for it something else for which
they found a demand there, frequently gold and
silver.

It is thus that the same capital will in any
country put into motion a greater or smaller
quantity of productive labour, and add a greater
or smaller value to the annual produce of its
land and labour, according to the different pro
portions in which it is employed in agriculture,
manufactures, and wholesale trade. The differ
ence too is very great, according to the different
sorts of wholesale trade in which any part of it is
employed.

All wholesale trade, all buying in order to
sell again by wholesale, may be reduced to three
different sorts. The home trade, the foreign
trade of consumption, and the carrying trade.
The home trade is employed in purchasing in one
part of the same country, and selling in another,

60 THE NATUBE AND CAUSES OF BOOK II.

the produce of the industry of that country. It
comprehends both the inland and the coasting
trade. The foreign trade of consumption is em
ployed in purchasing foreign goods for home
consumption. The carrying trade is employed
in transacting the commerce of foreign countries,
or in carrying the surplus produce of one to an
other.

The capital which is employed in purchasing
in one part of the country, in order to sell in an
other, the produce of the industry of that country,
generally replaces by every such operation two
distinct capitals that had both been employed in
the agriculture or manufactures of that country,
and thereby enables them to continue that em
ployment. When it sends out from the residence
of the merchant a certain value of commodities,
it generally brings back in return at least an equal
value of other commodities. When both are the
produce of domestic industry, it necessarily re
places by every such operation two distinct ca
pitals, which had both been employed in support
ing productive labour, and thereby enables them
to continue that support. The capital which
sends Scotch manufactures to London, and brings
back English corn and manufactures to Edin
burgh, necessarily replaces, by every such ope
ration, two British capitals which had both been
employed in the agriculture or manufactures of
Great Britain.

The capital employed in purchasing foreign
goods for home-consumption, when this purchase
is made with the produce of domestic industry,

CHAP. v. THE WEALTH OF NATIONS. 61

replaces too, by every such operation, two dis
tinct capitals : but one of them only is employed
in supporting domestic industry. The capital
which sends British goods to Portugal, and
brings back Portuguese goods to Great Britain,
replaces by every such operation only one British
capital. The other is a Portuguese one. Though
the returns, therefore, of the foreign trade of
consumption should be as quick as those of the
home-trade, the capital employed in it will give
but one half the encouragement to the industry
or productive labour of the country.

But the returns of the foreign trade of con
sumption are very seldom so quick as those of
the home-trade. The returns of the home-trade
generally come in before the end of the year,
and sometimes three or four times in the year.
The returns of the foreign trade of consumption
seldom come in before the end of the year, and
sometimes not till after two or three years. A
capital, therefore, employed in the home-trade
will sometimes make twelve operations, or be
sent out and returned twelve times, before a
capital employed in the foreign trade of con
sumption has made one. If the capitals are
equal, therefore, the one will give four-and-
twenty times more encouragement and support
to the industry of the country than the other.

The foreign goods for home-consumption may
sometimes be purchased, not with the produce of
domestic industry, but with some other foreign
goods. These last, however, must have been
purchased either immediately with the produce

62 THE NATURE AND CAUSES OF BOOK II.

of domestic industry, or with something else
that had been purchased with it ; for, the case
of war and conquest excepted, foreign goods can
never be acquired, but in exchange for some
thing that had been produced at home, either
immediately, or after two or more different ex
changes. The effects, therefore, of a capital
employed in such a round-about foreign trade
of consumption, are, in every respect, the same
as those of one employed in the most direct trade
of the same kind, except that the final returns
are likely to be still more distant, as they must
depend upon the returns of two or three distinct
foreign trades. If the hemp and flax of Riga are
purchased with the tobacco of Virginia, which
had been purchased with British manufactures,
the merchant must wait for the returns of two
distinct foreign trades before he can employ the
same capital in repurchasing a like quantity of
British manufactures. If the tobacco of Virginia
had been purchased not with British manufac
tures, but with the sugar and rum of Jamaica
which had been purchased with those manufac
tures, he must wait for the returns of three. If
those two or three distinct foreign trades should
happen to be carried on by two or three distinct
merchants, of whom the second buys the goods
imported by the first, and the third buys those
imported by the second, in order to export them
again, each merchant indeed will in this case
receive the returns of his own capital more
quickly ; but the final returns of the whole ca
pital employed in the trade will be just as slow

CHAP. v. THE WEALTH OF NATIONS. 63

as ever. Whether the whole capital employed in
such a round-about trade belong to one merchant
or to three, can make no difference with regard
to the country, though it may with regard to the
particular merchants. Three times a greater ca
pital must in both cases be employed, in order
to exchange a certain value of British manufac
tures for a certain quantity of flax and hemp,
than would have been necessary, had the ma
nufactures and the flax and hemp been directly
exchanged for one another. The whole capital
employed, therefore, in such a round-about
foreign trade of consumption, will generally
give less encouragement and support to the
productive labour of the country, than an equal
capital employed in a more direct trade of the
same kind.

Whatever be the foreign commodity with
which the foreign goods for home-consumption
are purchased, it can occasion no essential dif
ference either in the nature of the trade, or in the
encouragement and support which it can give to
the productive labour of the country from which
it is carried on. If they are purchased with the
gold of Brazil, for example, or with the silver of
Peru, this gold and silver, like the tobacco of
Virginia, must have been purchased with some
thing that either was the produce of the industry
of the country, or that had been purchased with
something else that was so. So far, therefore,
as the productive labour of the country is con
cerned, the foreign trade of consumption which
is carried on by means of gold and silver, has all

64 THE NATURE AND CAUSES OF BOOK II.

the advantages and all the inconveniencies of any
other equally round-about foreign trade of con
sumption, and will replace just as fast or just as
slow the capital which is immediately employed
in supporting that productive labour. It seems
even to have one advantage over any other
equally round-about foreign trade. The trans
portation of those metals from one place to an
other, on account of their small bulk and great
value, is less expensive than that of almost any
other foreign goods of equal value. Their
freight is much less, and their insurance not
greater ; and no goods, besides, are less liable
to suffer by the carriage. An equal quantity of
foreign goods, therefore, may frequently be pur
chased with a smaller quantity of the produce of
domestic industry, by the intervention of gold
and silver, than by that of any other foreign
goods. The demand of the country may fre
quently, in this manner, be supplied more com
pletely, and at a smaller expense than in any
other. Whether, by the continual exportation
of those metals, a trade of this kind is likely to
impoverish the country from which it is carried
on, in any other way, I shall have occasion to
examine at great length hereafter.

That part of the capital of any country which
is employed in the carrying trade, is altogether
withdrawn from supporting the productive la
bour of that particular country, to support that
of some foreign countries. Though it may re
place by every operation two distinct capitals,
yet neither of them belongs to that particular

CHAP. V. THE WEALTH OF NATIONS. 65

country. The capital of the Dutch merchant,
which carries the corn of Poland to Portugal,
and brings back the fruits and wines of Portugal
to Poland, replaces by every such operation two
capitals, neither of which had been employed in
supporting the productive labour of Holland ;
but one of them in supporting that of Poland,
and the other that of Portugal. The profits
only return regularly to Holland, and constitute
the whole addition which this trade necessarily
makes to the annual produce of the land and la
bour of that country. When, indeed, the carry
ing trade of any particular country is carried on
with the ships and sailors of that country, that
part of the capital employed in it which pays the
freight, is distributed among, and puts into mo
tion, a certain number of productive labourers of
that country. Almost all nations that have had
any considerable share of the carrying trade have,
in fact, carried it on in this manner. The trade
itself has probably derived its name from it, the
people of such countries being the carriers to
other countries. It does not, however, seem
essential to the nature of the trade that it should
be so. A Dutch merchant may, for example,
employ his capital in transacting the commerce
of Poland and Portugal, by carrying part of the
surplus produce of the one to the other, not in
Dutch, but in British bottoms. It may be pre
sumed, that he actually does so upon some. parti
cular occasions. It is upon this account, however,
that the carrying trade has been supposed pecu
liarly advantageous to such a country as Great

VOL. II. F

06 THE NATURE AND CAUSES OF BOOK II.

Britain, of which the defence and security de
pend upon the number of its sailors and shipping.
But the same capital may employ as many sailors
and shipping either in the foreign trade of con
sumption or even in the home-trade, when car
ried on by coasting vessels, as it could in the
carrying trade. The number of sailors and
shipping which any particular capital can employ,
does not depend upon the nature of the trade,
but partly upon the bulk of the goods in propor
tion to their value, and partly upon the distance
of the ports between which they are to be car
ried ; chiefly upon the former of those two cir
cumstances. The coal trade from Newcastle to
London, for example, employs more shipping
than all the carrying trade of England, though
the ports are at no great distance. To force,
therefore, by extraordinary encouragements, a
larger share of the capital of any country into
the carrying trade, than what would naturally
go to it, will not always necessarily increase the
shipping of that country.

The capital, therefore, employed in the home-
trade of any country will generally give encou
ragement and support to a greater quantity of
productive labour in that country, and increase
the value of its annual produce more than an equal
capital employed in the foreign trade of con
sumption : and the capital employed in this lat
ter trade has in both these respects a still greater
advantage over an equal capital employed in the
carrying trade. The riches, and, so far as power
depends upon riches, the power of every country,

CHAP. V. THE WEALTH OP NATIONS. 67

must always be in proportion to the value of its
annual produce, the fund from which all taxes
must ultimately be paid. But the great object
of the political ceconomy of every country, is
to increase the riches and power of that country.
It ought, therefore, to give no preference nor
superior encouragement to the foreign trade of
consumption above the home-trade, nor to the
carrying trade above either of the other two. It
ought neither to force nor to allure into either
of those two channels, a greater share of the
capital of the country than what would naturally
flow into them of its own accord.

Each of those different branches of trade,
however, is not only advantageous, but neces
sary and unavoidable, when the course of things,
without any constraint or violence, naturally in
troduces it.

When the produce of any particular branch of
industry exceeds what the demand of the coun
try requires, the surplus must be sent abroad,
and exchanged for something for which there is
a demand at home. Without such exportation,
a part of the productive labour of the country
must cease, and the value of its annual produce
diminish. The land and labour of Great Bri
tain produce generally more corn, woollens,
and hard-ware, than the demand of the home-
market requires. The surplus part of them,
therefore, must be sent abroad, and exchanged
for something for which there is a demand at
home. It is only by means of such exportation,
that this surplus can acquire a value sufficient to

F 2

68 THE NATURE AND CAUSES OF BOOK II.

compensate the labour and expense of producing
it. The neighbourhood of the sea coast, and
the banks of all navigable rivers, are advan
tageous situations for industry, only because
they facilitate the exportation and exchange of
such surplus produce for something else which
is more in demand there.

When the foreign goods which are thus pur
chased with the surplus produce of domestic in
dustry exceed the demand of the home-market,
the surplus part of them must be sent abroad
again, and exchanged for something more in
demand at home. About ninety-six thousand
hogsheads of tobacco are annually purchased in
Virginia and Maryland, with a part of the sur
plus produce of British industry. But the de
mand of Great Britain does not require, per
haps, more than fourteen thousand. If the re-
maining eighty-two thousand, therefore, could
not be sent abroad and exchanged for something
more in demand at home, the importation of
them must cease immediately, and with it the
productive labour of all those inhabitants of
Great Britain, who are at present employed in
preparing the goods with which these eighty-two
thousand hogsheads are annually purchased.
Those goods, which are part of the produce of
the land and labour of Great Britain, having no
market at home, and being deprived of that
which they had abroad, must cease to be pro
duced. The most round-about foreign trade of
consumption, therefore, may, upon some occa
sions, be as necessary for supporting the produc-

CHAP. V. THE WEALTH OF NATIONS. 69

live labour of the country, and the value of its
annual produce, as the most direct.

When the capital stock of any country is in
creased to such a degree, that it cannot be all
employed in supplying the consumption, and
supporting the productive labour of that parti
cular country, the surplus part of it naturally
disgorges itself into the carrying trade, and is
employed in performing the same offices to other
countries. The carrying trade is the natural
effect and symptom of great national wealth ; but
it does not seem to be the natural cause of it.
Those statesmen who have been disposed to fa
vour it with particular encouragements, seem to
have mistaken the effect and symptom for the
cause. Holland, in proportion to the extent of
the land, and the number of its inhabitants, by
far the richest country in Europe, has, accord
ingly, the greatest share of the carrying trade of
Europe. England, perhaps the second richest
country of Europe, is likewise supposed to have
a considerable share of it ; though what com
monly passes for the carrying trade of England,
will frequently, perhaps, be found to be no more
than a round-about foreign trade of consump
tion. Such are, in a great measure, the trades
which carry the goods of the East and West In
dies, and of America, to the different European
markets. Those goods are generally purchased
either immediately with the produce of British
industry, or with something else which had been
purchased with that produce, and the final re
turns of those trades are generally used or con-

70 THE NATURE AND CAUSES OF BOOK IT.

sumed in Great Britain. The trade which is
carried on in British bottoms between the dif
ferent ports of the Mediterranean, and some
trade of the same kind carried on by British
merchants between the different ports of India,
make, perhaps, the principal branches of what is
properly the carrying trade of Great Britain.

The extent of the home-trade and of the ca
pital which can be employed in it, is necessarily
limited by the value of the surplus produce of
all those distant places within the country which
have occasion to exchange their respective pro
ductions with one another. That of the foreign
trade of consumption, by the value of the sur
plus produce of the whole country and of what
can be purchased with it. That of the carrying
trade, by the value of the surplus produce of all
the different countries in the world. Its possi
ble extent, therefore, is in a manner infinite in
comparison of that of the other two, and is ca
pable of absorbing the greatest capitals.

The consideration of his own private profit, is
the sole motive which determines the owner of
any capital to employ it either in agriculture, in
manufactures, or in some particular branch of
the wholesale or retail trade. The different
quantities of productive labour which it may put
into motion, and the different values which it
may add to the annual produce of the land and
labour of the society, according as it is employed
in one or other of those different ways, never
enter into his thoughts. In countries, there
fore, where agriculture is the most profitable of

CHAP. v. THE WEALTH OF NATIONS. 71

all employments, and farming and improving
the most direct roads to a splendid fortune, the
capitals of individuals will naturally be em
ployed in the manner most advantageous to the
whole society. The profits of agriculture, how
ever, seem to have no superiority over those of
other employments in any part of Europe. Pro
jectors, indeed, in every corner of it, have with
in these few years amused the public with most
magnificent accounts of the profits to be made
by the cultivation and improvement of land.
Without entering into any particular discussion
of their calculations, a very simple observation
may satisfy us that the result of them must be
false. We see every day the most splendid for
tunes that have been acquired in the course of a
single life by trade and manufactures, fre
quently from a very small capital, sometimes
from no capital. A single instance of such a
fortune acquired by agriculture in the same
time, and from such a capital, has not, perhaps,
occurred in Europe during the course of the
present century. In all the great countries of
Europe, however, much good land still remains
uncultivated, and the greater part of what is cul
tivated, is far from being improved to the de
gree of which it is capable. Agriculture, there
fore, is almost every-where capable of absorbing
a much greater capital than has ever yet been
employed in it. What circumstances in the
policy of Europe have given the trades which are
carried on in towns so great an advantage over
that which is carried on in the country, that pri-

72 THE NATURE AND CAUSES OF BOOK II.

vate persons frequently find it more for their ad
vantage to employ their capitals in the most di
stant carrying trades of Asia and America, than
in the improvement and cultivation of the most
fertile fields in their own neighbourhood, I shall
endeavour to explain at full length in the two
following books.

CHAP. I. THE WEALTH OF NATIONS. 73

BOOK III.

Of the different Progress of Opulence in dif«
ferent Nations.

CHAPTER I.

Of the natural Progress of Opulence.

THE great commerce of every civilized so
ciety is that carried on between the inhabitants
of the town and those of the country. It con-
sists in the exchange of rude for manufactured
produce, either immediately, or by the interven
tion of money, or of some sort of paper which re^
presents money. The country supplies the town
with the means of subsistence and the materials
of manufacture. The town repays this supply
by sending back a part of the manufactured pro-
duce to the inhabitants of the country. The
town, in which there neither is nor can be any
reproduction of substances, may very properly
be said to gain its whole wealth and subsistence
from the country. We must not, however,
upon this account, imagine that the gain of the
town is the loss of the country. The gains of
both are mutual and reciprocal, and the divi
sion of labour is in this, as in all other cases,
advantageous to all the different persons em
ployed in the various occupations into which it

74 THE NATURE AND CAUSES OF BOOK III.

is subdivided. The inhabitants of the country
purchase of the town a greater quantity of ma
nufactured goods with the produce of a much
smaller quantity of their own labour, than they
must have employed had they attempted to pre
pare them themselves. The town affords a mar
ket for the surplus produce of the country, or
what is over and above the maintenance of the
cultivators, and it is there that the inhabitants
of the country exchange it for something else
which is in demand among them. The greater
the number and revenue of the inhabitants of
the town, the more extensive is the market which
it affords to those of the country; and the more
extensive that market, it is always the more
advantageous to a great number. The corn
which grows within a mile of the town, sells
there for the same price with that which comes
from twenty miles distance. But the price of
the latter must generally, not only pay the ex
pense of raising and bringing it to market, but
afford too the ordinary profits of agriculture to
the farmer. The proprietors and cultivators of
the country, therefore, which lies in the neigh
bourhood of the town, over and above the or
dinary profits of agriculture, gain in the price
of what they sell, the whole value of the car
riage of the like produce that is brought from
more distant parts, and they save, besides, the
whole value of this carriage in the price of what
they buy. Compare the cultivation of the lands
in the neighbourhood of any considerable town,
with that of those which lie at some distance

CHAP. I. THE WEALTH OF NATIONS. 75

from it, and you will easily satisfy yourself how
much the country is benefited by the commerce
of the town. Among all the absurd speculations
that have been propagated concerning the ba
lance of trade, it has never been pretended that
either the country loses by its commerce with the
town, or the town by that with the country which
maintains it.

As subsistence is, in the nature of things, prior
to conveniency and luxury, so the industry which
procures the former, must necessarily be prior to
that which ministers to the latter. The culti
vation and improvement of the country, there
fore, which affords subsistence, must necessarily
be prior to the increase of the town, which fur
nishes only the means of conveniency and luxury.
It is the surplus produce of the country only, or
what is over and above the maintenance of the
cultivators, that constitutes the subsistence of
the town, which can therefore increase only with
the increase of this surplus produce. The town,
indeed, may not always derive its whole sub
sistence from the country in its neighbourhood,
or even from the territory to which it belongs,
but from very distant countries; and this,
though it forms no exception from the gene
ral rule, has occasioned considerable variations
In the progress of opulence in different ages and
nations.

That order of things which necessity imposes
in general, though not in every particular coun
try, is, in every particular country, promoted by
the natural inclinations of man. If human insti-

76 THE NATURE AND CAUSES OF BOOK III.

tutions had never thwarted those natural inclina
tions, the towns could nowhere have increased
beyond what the improvement and cultivation
of the territory in which they were situated could
support : till such time, at least, as the whole of
that territory was completely cultivated and im
proved. Upon equal, or nearly equal profits,
most men will chose to employ their capitals,
rather in the improvement and cultivation of
land, than either in manufactures or in foreign
trade. The man who employs his capital in
land, has it more under his view and command,
and his fortune is much less liable to accidents,
than that of the trader, who is obliged frequently
to commit it, not only to the winds and the
waves, but to the more uncertain elements of
human folly and injustice, by giving great cre
dits in distant countries to men, with whose
character and situation he can seldom be tho
roughly acquainted. The capital of the land
lord, on the contrary, which is fixed in the
improvement of his land, seems to be as well
secured as the nature of human affairs can admit
of. The beauty of the country besides, the
pleasures of a country life, the tranquillity of
mind which it promises, and wherever the injus
tice of human laws does not disturb it, the in
dependency which it really affords, have charms
that more or less attract every body ; and as to
cultivate the ground was the original destination
of man, so in every stage of his existence he
seems to retain a predilection for this primitive
employment.

CHAP. I. THE WEALTH OF NATIONS. 77

Without the assistance of some artificers, in
deed, the cultivation of land cannot be carried
on, but with great inconveniency and continual
interruption. Smiths, carpenters, wheel-wrights,
and plough-wrights, masons, and bricklayers,
tanners, shoemakers, and taylors, are people,
whose service the farmer has frequent occasion
for. Such artificers too stand, occasionally, in
need of the assistance of one another ; and as
their residence is not, like that of the farmer,
necessarily tied down to a precise spot, they natu-
rallysettle in the neighbourhood of one another,
and thus form a small town or village. The
butcher, the brewer, and the baker, soon join
them together, with many other artificers and
retailers, necessary or useful for supplying their
occasional wants, and who contribute still fur
ther to augment the town. The inhabitants of
the town and those of the country are mutually
the servants of one another. The town is a con
tinual fair or market, to which the inhabitants of
the country resort, in order to exchange their
rude for manufactured produce. It is this com
merce which supplies the inhabitants of the town
both with the materials of their work, and the
means of their subsistence. The quantity of the
finished work which they sell to the inhabitants
of the country, necessarily regulates the quan
tity of the materials and provisions which they
buy. Neither their employment nor subsistence,
therefore, can augment, but in proportion to the
augmentation of the demand from the country
for finished work j and this demand can augment

78 THE NATURE AND CAUSES OF BOOK ill.

only in proportion to the extension of improve
ment and cultivation. Had human institutions,
therefore, never disturbed the natural course of
things, the progressive wealth and increase of the
towns would, in every political society, be con
sequential, and in proportion to the improvement
and cultivation of the territory or country.

In our North American colonies, where un
cultivated land is still to be had upon easy terms,
no manufactures for distant sale have ever yet
been established in any of their towns. When
an artificer has acquired a little more stock than
is necessary for carrying on his own business in
supplying the neighbouring country, he does
not, in North America, attempt to establish with
it a manufacture for more distant sale, but em
ploys it in the purchase and improvement of
uncultivated land. From artificer he becomes
planter, and neither the large wages nor the easy
subsistence which that country affords to arti
ficers, can bribe him rather to work for other
people than for himself. He feels that an artifi
cer is. the servant of his customers, from whom
he derives his subsistence : but that a planter
who cultivates his own land, and derives his ne
cessary subsistence from the labour of his own
family, is really a master, and independent of all
the world.

In countries, on the contrary, where there is
either no uncultivated land, or none that can be
had upon easy terms, every artificer who has ac
quired more stock than he can employ in the oc
casional jobs of the neighbourhood, endeavours to

CHAP. I. THE WEALTH OF NATIONS. 79

prepare work for more distant sale. The smith
erects some sort of iron, the weaver some sort of
linen or woollen manufactory. Those different
manufactures come, in process of time, to be
gradually subdivided, and thereby improved and
refined in a great variety of ways, which may
easily be conceived, and which it is therefore
unnecessary to explain any further.

In seeking for employment to a capital, manu
factures are, upon equal or nearly equal profits,
naturally preferred to foreign commerce, for the
same reason that agriculture is naturally prefer
red to manufactures. As the capital of the land
lord or farmer is more secure than that of the ma
nufacturer, so the capital of the manufacturer
being at all times more within his view and com
mand, is more secure than that of the foreign
merchant. In every period, indeed, of every
society, the surplus part both of the rude and
manufactured produce, or that for which there
is no demand at home, must be sent abroad in
order to be exchanged for something for which
there is some demand at home. But whether
the capital, which carries this surplus produce
abroad, be a foreign or a domestic one, is of
very little importance. If the society has not
acquired sufficient capital both to cultivate all
its lands, and to manufacture in the completest
manner the whole of its rude produce, there is
even a considerable advantage that that rude
produce should be exported by a foreign capi
tal, in order that the whole stock of the society
may be employed in more useful purposes. The

80 THE NATURE AND CAUSES OF BOOK ill.

wealth of ancient Egypt, that of China and In-
dostan, sufficiently demonstrate that a nation
may attain a very high degree of opulence,
though the greater part of its exportation trade
be carried on by foreigners. The progress of
our North American and West Indian colonies
would have been much less rapid, had no capital
but what belonged to themselves been employed
in exporting their surplus produce.

According to the natural course of things,
therefore, the greater part of the capital of every
growing society is, first, directed to agriculture,
afterwards to manufactures, and last of all to
foreign commerce. This order of things is so
very natural, that in every society that had any
territory, it has always, I believe, been in some
degree observed. Some of their lands must have
been cultivated, before any considerable towns
could be established, and some sort of coarse in
dustry of the manufacturing kind must have
been carried on in those towns, before they
could well think of employing themselves in fo
reign commerce.

But though this natural order of things must
have taken place in some degree in every such
society, it Jias, in all the modern states of Eu
rope, been, in many respects, entirely inverted.
The foreign commerce of some of their cities
has introduced all their finer manufactures, or
such as were fit for distant sale ; and manufactures
and foreign commerce together, have given birth
to the principal improvements of agriculture.
The manners and customs which the nature of

CHAP. II. THE WEALTH OF NATIONS. 81

their original government introduced, and which
remained after that government was greatly
altered, necessarily forced them into this un
natural and retrograde order.

CHAPTER II.

Of the Discouragement of Agriculture in the
ancient State of Europe after the Fall of the
Roman Empire.

WHEN the German and Scythian nations over"
ran the western provinces of the Roman em.
pire, the confusions which followed so great a
revolution lasted for several centuries. The
rapine and violence which the barbarians exer
cised against the ancient inhabitants, interrupted
the commerce between the towns and the coun_
try. The towns were deserted, and the country
was left uncultivated, and the western provinces
of Europe, which had enjoyed a considerable de
gree of opulence under the Roman empire, sunk
into the lowest state of poverty and barbarism.
During the continuance «f those confusions, the
chiefs and principal leaders of those nations, ac
quired or usurped to themselves the greater part
of the lands of those' countries. A great part
of them was uncultivated ; but no part of them,
whether cultivated or uncultivated, was left
without a proprietor. All of them were en-

THE NATURE AND CAUSES OF BOOK Iir.

grossed, arid the greater part by a few great
proprietors.

This original engrossing of uncultivated lands,
though a great, might have been but a transi
tory evil. They might soon have been divided
again, and broke into small parcels either by
succession or by alienation. The law of pri
mogeniture hindered them from being divided
by succession ; the introduction of entails pre
vented their being broke into small parcels by
alienation.

When land, like moveables, is considered as
the means only of subsistence and enjoyment, the
natural law of succession divides it, like them,
among all the children of the family ; of all of
whom the subsistence and enjoyment maybe sup
posed equally dear to the father. This natural
law of succession accordingly took place among
the Romans, who made no more distinction be
tween elder and younger, between male and fe
male, in the inheritance of lands, than we do in
the distribution of moveables. But when land
was considered as the means, not of subsistence
merely, but of power and protection, it was
thought better that it should descend undivided
to one. In those disorderly times, every great
landlord was a sort of petty prince. His tenants
were his subjects. He was their judge, and in
some respects their legislator in peace, and their
leader in war. He made war according to his
own discretion, frequently against his neighbours,
and sometimes against his sovereign. The se
curity of a landed estate, therefore, the protection

CHAP. II. THE WEALTH OF NATIONS. 83

which its owner could afford to those who dwelt
on it, depended upon its greatness. To divide
it was to ruin it, and to expose every part of it to
be oppressed and swallowed up by the incursions
of its neighbours. The law of primogeniture,
therefore, came to take place, not immediately,
indeed, but in process of time, in the succession
of landed estates, for the same reason that it has
generally taken place in that of monarchies,
though not always at their first institution. That
the power, and consequently the security of the
monarchy, may not be weakened by division, it
must descend entire to one of the children. To
which of them so important a preference shall be
given, must be determined by some general rule,
founded not upon the doubtful distinctions of
personal merit, but upon some plain and evi
dent difference which can admit of no dispute.
Among the children of the same family, there
can be no indisputable difference but that of sex,
and that of age. The male sex is universally
preferred to the female ; and when all other
things are equal, the elder every where takes
place of the younger. Hence the origin of the
right of primogeniture, and of what is called
lineal succession.

Laws frequently continue in force long after
the circumstances, which first gave occasion to
them, and which could alone render them reason-
able, are no more. In the present state of Eu
rope, the proprietor of a single acre of land is as
perfectly secure of his possession as the proprietor
of a hundred thousand. The right of primo-

84 THE NATURE AND CAUSES OF BOOK III.

geniture, however, still continues to be respected,
and as of all institutions it is the fittest to sup
port the pride of family distinctions, it is still
likely to endure for many centuries. In every
other respect, nothing can be more contrary to
the real interest of a numerous family, than a
right which, in order to enrich one, beggars all
the rest of the children.

Entails are the natural consequences of the
law of primogeniture. They were introduced to
preserve a certain lineal succession, of which the
law of primogeniture first gave the idea, and to
hinder any part of the original estate from being
carried out of the proposed line either by gift, or
devise, or alienation ; either by the folly, or by
the misfortune of any of its successive owners.
They were altogether unknown to the Romans.
Neither their substitutions, nor fideicommisses
bear any resemblance to entails, though some
French lawyers have thought proper to dress the
modern institution in the language and garb of
those ancient ones.

When great landed estates were a sort of prin
cipalities, entails might not be unreasonable.
Like what are called the fundamental laws of
some monarchies, they might frequently hinder
the security of thousands from being endangered
by the caprice or extravagance of one man. But
in the present state of Europe, when small as well
as great estates derive their security from the
laws of their country, nothing can be more com
pletely absurd. They are founded upon the
most absurd of all suppositions, the supposition

CHAP. II. THE WEALTH OF NATIONS. 85

that every successive generation of men have not
an equal right to the earth, and to all that it
possesses ; but that the property of the present
generation should be restrained and regulated
according to the fancy of those who died per
haps five hundred years ago. Entails, however,
are still respected through the greater part of
Europe, in those countries particularly in which
noble birth is a necessary qualification for the
enjoyment either of civil or military honours.
Entails are thought necessary for maintaining
this exclusive privilege of the nobility to the
great offices and honours of their country ; and
that order having usurped one unjust advantage
over the rest of their fellow-citizens, lest their
poverty should render it ridiculous, it is thought
reasonable that they should have another. The
common law of England, indeed, is said to ab
hor perpetuities, and they are accordingly more
restricted there than in any other European
monarchy ; though even England is not alto
gether without them. In Scotland more than
one-fifth, perhaps more than one-third part of
the whole lands of the country, are at present
supposed to be under strict entail.

Great tracts of uncultivated land were, in
this manner, not only engrossed by particular fa
milies, but the possibility of their being divided
again was as much as possible precluded for ever.
It seldom happens, however, that a great pro
prietor is a great improver. In the disorderly
times which gave birth to those barbarous insti
tutions, the great proprietor was sufficiently em-

86 THE NATURE AND CAUSES OF BOOK III.

ployed in defending his own territories, or in
extending his jurisdiction and authority over
those of his neighbours. He had no leisure to
attend to the cultivation and improvement of
land. When the establishment of law and order
afforded him this leisure, he often wanted the
inclination, and almost always the requisite abili
ties. If the expense of his house and person
either equalled or exceeded his revenue, as it
did very frequently, he had no stock to employ
in this manner. If he was an oeconomist, he ge
nerally found it more profitable to employ his
annual savings in new purchases, than in the im
provement of his old estate. To improve land
with profit, like all other commercial projects,
requires an exact attention to small savings and
small gains, of which a man born to a great for
tune, even though naturally frugal, is very sel
dom capable. . The situation of such a person
naturally disposes him to attend rather to orna
ment which pleases his fancy, than to profit for
which he has so little occasion. The elegance
of his dress, of his equipage, of his house, and
household furniture, are objects which from his
Infancy he has been accustomed to have some
anxiety about. The turn of mind which this
habit naturally forms, follows him when he
comes to think of the improvement of land.
He embellishes perhaps four or five hundred
acres in the neighbourhood of his house, at ten
times the expense which the land is worth after
all his improvements ; and finds that if he was
to improve his whole estate in the same manner^

CHAP. II. THE WEALTH OF NATIONS. 87

and he has little taste for any other, he would be
a bankrupt before he had finished the tenth part
of it. There stiil remain in both parts of the
united kingdom some great estates which have
continued without interruption in the hands of
the same family since the times of feudal anarchy.
Compare the present condition of those estates
with the possessions of the small proprietors in
their neighbourhood, and you will require no
other argument to convince you how unfavour
able such extensive property is to improvement.
If little improvement was to be expected from
such great proprietors, still less was to be hoped
for from those who occupied the land under
them. In the ancient state of Europe, the oc
cupiers of land were all tenants at will. They
were all or almost all slaves : but their slavery
was of a milder kind than that known among
the ancient Greeks and Romans, or even in our
West Indian colonies. They were supposed to
belong more directly to the land than to their
master. They could, therefore, be sold with it,
but not separately. They could marry, pro
vided it was with the consent of their master ;
and he could not afterwards dissolve the mar
riage by selling the man and wife to different
persons. If he maimed or murdered any of
them, he was liable to some penalty, though
generally but to a small one. They were not,
however, capable of acquiring property. What
ever they acquired was acquired to their master,
and he could take it from them at pleasure.
Whatever cultivation and improvement could be

88 THE NATURE AND CAUSES OF BOOK III.

carried on by means of such slaves, was properly
carried on by their master. It was at his ex
pense. The seed, the cattle and the instruments
of husbandry were all his* " It was for his benefit.
Such slaves could acquire nothing but their daily
maintenance. It was properly the proprietor
himself therefore, that, in this case, occupied
his own lands, and cultivated them by his own
bondmen. This species of slavery still subsists
in Russia, Poland, Hungary, Bohemia, Moravia,
and other parts of Germany. It is only in the
western and south-western provinces of Europe,
that it has gradually been abolished altogether.
But if great improvements are seldom to be
expected from great proprietors, they are least
of all to be expected when they employ slaves
for their workmen. The experience of all ages
and nations, I believe, demonstrates that the
work done by slaves, though it appears to cost
only their maintenance, is in the end the dearest
of any. A person who can acquire no property,
can have no other interest but to eat as much,
and to labour as little as possible. Whatever
work he does beyond what is sufficient to pur
chase his own maintenance, can be squeezed out
of him by violence only, and not by any interest
of his own. In ancient Italy, how much the
cultivation of corn degenerated, how unprofit
able it became to the master, when it fell under
the management of slaves, is remarked by both
Pliny and Columella. In the time of Aristotle
it had not been much better in ancient Greece.
Speaking of the ideal republic described in the

CHAP. IT. THE WEALTH OF NATIONS. 89

laws of Plato, to maintain five thousand idle
men (the number of warriors supposed necessary
for its defence), together with their women and
servants, would require, he says, a territory of
boundless extent and fertility, like the plains of
Babylon.

The pride of man makes him love to domi
neer, and nothing mortifies him so much as to be
obliged to condescend to persuade his inferiors.
Wherever the law allows it, and the nature of
the work can afford it, therefore, he will gene
rally prefer the service of slaves to that of free
men. The planting of sugar and tobacco can
afford the expense of slave cultivation. The
raising of corn, it seems, in the present times,
cannot. In the English colonies, of which the
principal produce is corn, the far greater part of
the work is done by freemen. The late resolu
tion of the Quakers in Pennsylvania, to set at
liberty all their negro slaves, may satisfy us that
their number cannot be very great. Had they
made any considerable part of their property,
such a resolution could never have been agreed
to. In our sugar colonies, on the contrary, the
whole work is done by slaves, and in our to
bacco colonies a very great part of it. The
profits of a sugar plantation in any of our West
Indian colonies are generally much greater than
those of any other cultivation that is known
either in Europe or America: and the profits of
a tobacco plantation, though inferior to those
of sugar, are superior to those of corn, as has
already been observed. Both can afford the ex-

90 THE NATURE AND CAUSES OF BOOK HI,

pense of slave cultivation, but sugar can afford
it still better than tobacco. The number of
negroes accordingly is much greater, in propor
tion to that of whites, in our sugar than in our
tobacco colonies.

To the slave cultivators of ancient times, gra
dually succeeded a species of farmers known at
present in France by the name of Metayers.
They are called in Latin, Coloni Partiarii.
They have been so long in disuse in England
that at present I know no English name for
them. The proprietor furnished them with the
seed, cattle, and instruments of husbandry, the
whole stock, in short, necessary for cultivating
the farm. The produce was divided equally
between the proprietor and the farmer, after
setting aside what was judged necessary for
keeping up the stock, which was restored to the
proprietor when the farmer either quitted, or
was turned out of the farm.

Land occupied by such tenants is properly
cultivated at the expense of the proprietor as
much as that occupied by slaves. There is,
however, one very essential difference between
them. Such tenants, being freemen, are capable
of acquiring property, and having a certain pro
portion of the produce of the land, they have a
plain interest that the whole produce should be
as great as possible, in order that their own pro
portion may be so. A slave, on the contrary,
who can acquire nothing but his maintenance,
consults his own ease by making the land pro
duce as little as possible over and above that

CHAP. II. THE WEALTH OF NATIONS. 91

maintenance. It is probable that it was partly
upon account of this advantage, and partly upon
account of the encroachments which the sove
reign, always jealous of the great lords, gra
dually encouraged their villains to make upon
their authority, and which seem at last to have
been such as rendered this species of servitude
altogether inconvenient, that tenure in villanage
gradually wore out through the greater part of
Europe. The time and manner, however, in
which so important a revolution was brought
about, is one of the most obscure points in mo
dern history. The church of Rome claims great
merit in it; and it is certain that so early as the
twelfth century, Alexander III. published a bull
for the general emancipation of slaves. It seems,
however, to have been rather a pious exhorta
tion, than a law to which exact obedience was
required from the faithful. Slavery continued
to take place almost universally for several cen
turies afterwards, till it was gradually abolished
by the joint operation of the two interests above
mentioned, that of the proprietor on the one
hand, and that of the sovereign on the other.
A villain enfranchised, and at the same time
allowed to continue in possession of the land,
having no stock of his own, could cultivate it
only by means of what the landlord advanced
to him, and must, therefore, have been what the
French call a Metayer.

It could never, however, be the interest even
of this last species of cultivators to lay out, in
the further improvement of the land, any part of

92 THE NATURE AND CAUSES OF BOOK ill.

the little stock which they might save from their
own share of the produce, because the lord, who
laid out nothing, was to get one half of what
ever it produced. The tithe, which is but a
tenth of the produce, is found to be a very great
hindrance to improvement. A tax, therefore,
which amounted to one-half, must have been an
effectual bar to it. It might be the interest of
a metayer to make the land produce as much as
could be brought out of it by means of the stock
furnished by the proprietor; but it could never
be his interest to mix any part of his own with
it. In France, where five parts out of six of the
whole kingdom are said to be still occupied by
this species of cultivators, the proprietors com
plain that their metayers take every opportunity
of employing the master's cattle rather in car
riage than in cultivation; because in the one
case they get the whole profits to themselves, in
the other they share them with their landlord.
This species of tenants still subsists in some parts
of Scotland. They are called steel-bow tenants.
Those ancient English tenants who are said by
Chief Baron Gilbert and Doctor Blackstone to
have been rather bailiffs of the landlord than
farmers properly so called, were probably of the
same kind.

To this species of tenancy succeeded, though
by very slow degrees, farmers properly so called,
who cultivated the land with their own stock,
paying a rent certain to the landlord. When
such farmers have a lease for a term of years,
they may sometimes find it for their interest to

CHAP. II. THE WEALTH OF NATIONS. 93

lay out part of their capital in the further im
provement of the farm ; because they may some
times expect to recover it, with a large profit,
before the expiration of the lease. The posses
sion even of such farmers, however, was long
extremely precarious, and still is so in many parts
of Europe. They could before the expiration of
their term be legally ousted of their lease, by a
new purchaser ; in England even by the ficti
tious action of a common recovery. If they
were turned out illegally by the violence of their
master, the action by which they obtained re
dress was extremely imperfect. It did not al
ways re-instate them in the possession of the land,
but gave them damages which never amounted
to the real loss. Even in England, the country
perhaps *of Europe where the yeomanry has al
ways been most respected, it was not till about
the 14th of Henry the Vllth that the action of
ejectment was invented, by which the tenant
recovers, not damages only but possession, and
in which his claim is not necessarily concluded
by the uncertain decision of a single assize.
This action has been found so effectual a remedy,
that, in the modern practice, when the landlord
has occasion to sue for the possession of the land,
he seldom makes use of the actions which pro
perly belong to him as landlord, the writ of right
or the writ of entry, but sues in the name of his
tenant, by the writ of ejectment. In England,
therefore, the security of the tenant is equal to
that of the proprietor. In England besides a
lease for life of forty shillings a year value is a

94 THE NATURE AND CAUSES OF BOOK III.

freehold, and entitles the lessee to vote for a
member of parliament; and as a great part of
the yeomanry have freeholds of this kind, the
whole order becomes respectable to their land
lords on account of the political consideration
which this gives them. There is, I believe, no
where in Europe except in England, any in
stance of the tenant building upon the land of
which he had no lease, and trusting that the
honour of his landlord would take no advantage
of so important an improvement. Those laws
and customs so favourable to the yeomanry,
have perhaps contributed more to the present
grandeur of England, than all their boasted re
gulations of commerce taken together.

The law which secures the longest leases
against successors of every kind is, so far as I
know, peculiar to Great Britain. It was intro
duced into Scotland so early as 1449, by a law
of James the lid. Its beneficial influence, how
ever, has been much obstructed by entails; the
heirs of entail being generally restrained from
letting leases for any long term of years, fre
quently for more than one year. A late act of
parliament has, in this respect, somewhat slack
ened their fetters, though they are still by much
too strait. In Scotland, besides, as no leasehold
gives a vote for a member of parliament, the
yeomanry are upon this account less respectable
to their landlords than in England.

In other parts of Europe, after it wasjfound
convenient to secure tenants both against heirs
and purchasers, the term of their security was

CHAP. II. THE WEALTH OF NATIONS. 95

still limited to a very short period ; in France",
for example, to nine years from the commence
ment of the lease. It has in that country, in
deed, been lately extended to twenty-seven, a
period still too short to encourage the tenant to
make the most important improvements. The
proprietors of land were anciently the legislators
of every part of Europe. The laws relating to
land, therefore, were all calculated for what they
supposed the interest of the proprietor. It was
for his interest, they had imagined, that no lease
granted by any of his predecessors should hinder
him from enjoying, during a long term of years,
the full value of his land. Avarice and injustice
are always short sighted, and they did not fore
see how much this regulation must obstruct im
provement, and thereby hurt in the long-run the
real interest of the landlord.

The farmers too, besides paying the rent, were
anciently, it was supposed, bound to perform a
great number of services to the landlord, which
were seldom either specified in the lease, or regu
lated by any precise rule, but by the use and
wont of the manor or barony. These services,
therefore, being almost entirely arbitrary, sub
jected the tenant to many vexations. In Scot
land the abolition of all services, not precisely
stipulated in the lease, has in the course of a
few years very much altered for the better the
condition of the yeomanry of that country.

The public services to which the yeomanry
were bound, were not less arbitrary than the
private ones. To make and maintain the high

9(5 THE NATURE AND CAUSES OF BOOK ill.

roads, a servitude which still subsists, I believe
everywhere, though with different degrees of
oppression in different countries, was not the
only one. When the king's troops, when his
household or his officers of any kind, passed
through any part of the country, the yeomanry
were bound to provide them with horses, car
riages, and provisions, at a price regulated by
the purveyor. Great Britain is, I believe, the
only monarchy in Europe where the oppression
of purveyance has been entirely abolished. It
still subsists in France and Germany.

The public taxes to which they were subject
were as irregular and oppressive as the services.
The ancient lords, though extremely unwilling
to grant themselves any pecuniary aid to their
sovereign, easily allowed him to tallage, as they
called it, their tenants, and had not knowledge
enough to foresee how much this must in the end
affect their own revenue. The taille, as it still
subsists in France, may serve as an example of
those ancient tallages. It is a tax upon the sup
posed profits of the farmer, which they estimate
by the stock that he has upon the farm. It is
his interest, therefore, to appear to have as little
as possible, and consequently to employ as little
as possible in its cultivation, and none in its im
provement. Should any stock happen to accu
mulate in the hands of a French farmer, the taille
is almost equal to a prohibition of its ever being
employed upon the land. This tax besides is
supposed to dishonour whoever is subject to it,
and to degrade him below, not only the rank of

CHAP. ii. THE WEALTH OF NATIONS. 97

a gentleman, but that of a burgher, and who
ever rents the lands of another becomes subject
to it. No gentleman, nor even any burgher
who has stock, will submit to this degradation.
This tax, therefore, not only hinders the stock
which accumulates upon the land from being
employed in its improvement, but drives away
all other stock from it. The ancient tenths and
fifteenths, so usual in England in former times,
seem, so far as they affected the land, to have
been taxes of the same nature with the taille.

Under all these discouragements, little im
provement could be expected from the occupiers
of land. That order of people, with all the
liberty and security which law can give, must
always improve under great disadvantages. The
farmer compared with the proprietor is as a mer
chant who trades with borrowed money compared
with one who trades with his own. The stock of
both may improve, but that of the one, with
only equal good conduct, must always improve
more slowly than that of the other, on account
of the large share of the profits which is con
sumed by the interest of the loan. The lands
cultivated by the farmer must, in the same man
ner, with only equal good conduct, be improved
more slowly than those cultivated by the pro
prietor ; on account of the large share of the pro
duce which is consumed in the rent, and which,
had the farmer been proprietor, he might have
employed in the further improvement of the
land. The station of a farmer besides is, from
the nature of things, inferior to that of a pro-

VOL. II. H

98 THE NATURE AND CAUSES OF BOOK III.

prietor. Through the greater part of Europe
the yeomanry are regarded as an inferior rank of
people, even to the better sort of tradesmen and
mechanics, and in all parts of Europe to the
great merchants and master manufacturers. It
can seldom happen, therefore, that a man of any
considerable stock should quit the superior, in
order to place himself in an inferior station.
Even in the present state of Europe, therefore,
little stock is likely to go from any other pro
fession to the improvement of land in the way
of farming. More does perhaps in Great Britain
than in any other country, though even there the
great stocks which are, in some places, employed
in farming, have generally been acquired by
farming, the trade, perhaps, in which, of all
others, stock is commonly acquired most slowly.
After small proprietors, however, rich and great
farmers are, in every country, the principal im
provers. There are more such perhaps in Eng
land than in any other European monarchy. In
the republican governments of Holland, and of
Berne in Switzerland, the farmers are said to be
not inferior to those of England.

The ancient policy of Europe was, over and
above all this, unfavourable to the improvement
and cultivation of land, whether carried on by
the proprietor or by the farmer ; first, by the
general prohibition of the exportation of corn
without a special licence, which seems to have
been a very universal regulation ; and secondly,
by the restraints which were laid upon the inland
commerce, not only of corn but of almost every

CHAP. III. THE WEALTH OF NATIONS. 99

other part of the produce of the farm, by the
absurd laws against ingrossers, regraters, and
forestallers, and by the privileges of fairs and
markets. It has already been observed in what
manner the prohibition of the exportation of
corn, together with some encouragement given
to the importation of foreign corn, obstructed
the cultivation of ancient Italy, naturally the
most fertile country in Europe, and at that time
the seat of the greatest empire in the world. To
what degree such restraints upon the inland
commerce of this commodity, joined to the ge
neral prohibition of exportation, must have dis
couraged the cultivation of countries less fertile
and less favourably circumstanced, it is not per
haps very easy to imagine.

CHAPTER III.

Of the Rise and Progress of Cities and Towns
after the Fall of the Roman Empire.

THE inhabitants of cities and towns were,
after the fall of the Roman empire, not more
favoured than those of the country. They con
sisted, indeed, of a very different order of peo
ple from the first inhabitants of the ancient re
publics of Greece and Italy. These last were
composed chiefly of the proprietors of lands,
among whom the public territory was originally
divided, and who found it convenient to build

H 2

100 THE NATURE AND CAUSES OF BOOK in,

their houses in the neighbourhood of one an
other, and to surround them with a wall, for the
sake of common defence. After the fall of the
Roman empire, on the contrary, the proprietors
of land seem generally to have lived in fortified
castles on their own estates, and in the midst of
their own tenants and dependants. The towns
were chiefly inhabited by tradesmen and me
chanics, who seem in those days to have been of
servile, or very nearly of servile condition. The
privileges which we find granted by ancient char
ters to the inhabitants of some of the principal
towns in Europe, sufficiently show what they
were before those grants. The people to whom
it is granted as a privilege that they might give
away their own daughters in marriage without
the consent of their lord, that upon their death
their own children, and not their lord, should
succeed to their goods, and that they might dis
pose of their own effects, by will, must, before
those grants, have been either altogether, or
very nearly in the same state of villanage with
the occupiers of land in the country.

They seem, indeed, to have been a very poor,
mean set of people, who used to travel about
with their goods from place to place, and from
fair to fair, like the hawkers and pedlars of the
present times. In all the different countries of
Europe then, in the same manner as in several of
the Tartar governments of Asia at present, taxes
used to be levied upon the persons and goods of
travellers, when they passed through certain ma
nors, when they went over certain bridges, when

CHAP. III. THE WEALTH OF NATIONS. 101

they carried about their goods from place to
place in a fair, when they erected in it a booth or
stall to sell them in. These different taxes were
known in England by the names of passage,
pontage, lastage, and stallage. Sometimes the
king, sometimes a great lord, who had, it seems,
upon some occasions, authority to do this, would
grant to particular traders, to such particularly
as lived in their own demesnes, a general ex
emption from such taxes. Such traders, though
in other respects of servile, or very nearly of
servile condition, were upon this account called
Free-traders. They in return usually paid to
their protector a sort of annual poll-tax. In
those days protection was seldom granted without
a valuable consideration, and this tax might,
perhaps, be considered as compensation for what
their patrons might lose by their exemption from
other taxes. At first, both those poll-taxes and
those exemptions seem to have been altogether
personal, and to have affected only particular
individuals, during either their lives, or the
pleasure of their protectors. In the very imper
fect accounts which have been published from
Domesday-book, of several of the towns of Eng
land, mention is frequently made sometimes of
the tax which particular burghers paid, each of
them, either to the king, or to some other great
lord, for this sort of protection ; and sometimes
of the general amount only of all those taxes*.

* See Brady's historical Treatise of Cities and Boroughs,
p. 3, &c.

102 THE NATURE AND CAUSES OF BOOK III.

But how servile soever may have been ori
ginally the condition of the inhabitants of the
towns, it appears evidently, that they arrived at
liberty and independency much earlier than the
occupiers of land in the country. That part of
the king's revenue which arose from such poll-
taxes in any particular town used commonly to
be let in farm, during a term of years for a rent
certain, sometimes to the sheriff of the county,
and sometimes to other persons. The burghers
themselves frequently got credit enough to be
admitted to farm the revenues of this sort which
arose out of their own town, they becoming
jointly and severally answerable for the whole
rent*. To let a farm in this manner was quite
agreeable to the usual economy of, I believe, the
sovereigns of all the different countries of Eu
rope; who used frequently to let whole manors
to all the tenants of those manors, they becom
ing jointly and severally answerable for the whole
rent; but in return being allowed to collect it in
their own way, and to pay it into the king's ex
chequer by the hands of their own bailiff, and
being thus altogether freed from the insolence
of the king's officers ; a circumstance in those
days regarded as of the greatest importance.

At first the farm of the town was probably
let to the burghers, in the same manner as it
had been to other farmers, for a term of years
only. In process of time, however, it seems to

* See Madox Firma Burgi, p. 18. also History of the Ex
chequer, chap. 10. sect, v. p. 223, first edition.

(HAP. in. THE WEALTH OF NATIONS. 103

have become the general practice to grant it to
them in fee, that is for ever, reserving a rent
certain never afterwards to be augmented. The
payment having thus become perpetual, the ex
emptions, in return, for which it was made, na
turally became perpetual too. Those exemp
tions, therefore, ceased to be personal, and could
not afterwards be considered as belonging to
individuals as individuals, but as burghers of a
particular burgh, which, upon this account, was
called a Free-burgh, for the same reason that
they had been called Free-burghers or Free
traders.

Along with this grant, the important privi
leges above mentioned, that they might give
away their own daughters in marriage, that their
children should succeed to them, and that they
might dispose of their own effects by will, were
generally bestowed upon the burghers of the
town to whom it was given. Whether such
privileges had before been usually granted along
with the freedom of trade, to particular burghers,
as individuals, I know not. I reckon it not im
probable that they were, though I cannot pro
duce any direct evidence of it. But however
this may have been, the principal attributes of
villanage and slavery being thus taken away
from them, they now, at least, became really free
in our present sense of the word Freedom.

Nor was this all. They were generally at the
same time erected into a commonalty or corpo
ration, with the privilege of having magistrates
and a town-council of their own, of making

104 THE NATURE AND CAUSES OF BOOK ill.

by-laws for their own government, of building
walls for their own defence, and of reducing ail
their inhabitants under a sort of military disci
pline, by obliging them to watch and ward ;
that is, as anciently understood, to guard and
defend those walls against all attacks and sur
prises by night as well as by day. In England
they were generally exempted from suit to the
hundred and county courts; and all such pleas
as should arise among them, the pleas of the
crown excepted, were left to the decision of
their own magistrates. In other countries much
greater and more extensive jurisdictions were
frequently granted to them*.

It might, probably, be necessary to grant to
such towns as were admitted to farm their own
revenues, some sort of compulsive jurisdiction to
oblige their own citizens to make payment. In
those disorderly times it might have been ex
tremely inconvenient to have left them to seek
this sort of justice from any other tribunal. But
it must seem extraordinary that the sovereigns
of all the different countries of Europe, should
have exchanged in this manner for a rent cer
tain, never more to be augmented, that branch
of their revenue, which was, perhaps, of all
others, the most likely to be improved by the
natural course of things, without either expense
or attention of their own: and that they should,

* See Madox Firma Burgi : See also Pfeffel in the re
markable events under Frederic II. and his successors of the
house of Suabia.

CHAP. III. THE WEALTH OF NATIONS. 105

besides, have in this mariner voluntarily erected
a sort of independent republics in the heart of
their own dominions.

In order to understand this, it must be re
membered, that in those days the sovereign of
perhaps no country in Europe was able to pro
tect, through the whole extent of his dominions,
the weaker part of his subjects from the oppres
sion of the great lords. Those whom the law

o

could not protect, and who were not strong-
enough to defend themselves, were obliged
either to have recourse to the protection of some
great lord, and in order to obtain it to become
either his slaves or vassals; or to enter into a
league of mutual defence for the common pro
tection of one another. The inhabitants of cities
and burghs, considered as single individuals,
had no power to defend themselves; but by en
tering into a league of mutual defence with their
neighbours, they were capable of making no
contemptible resistance. The lords despised the
burghers, whom they considered not only as of
a different order, but as a parcel of emancipated
slaves, almost of a different species from them
selves. The wealth of the burghers never failed
to provoke their envy and indignation, and they
plundered them upon every occasion without
mercy or remorse. The burghers naturally hated
and feared the lords. The king hated and feared
them too; but though perhaps he might despise,
he had no reason either to hate or fear the
burghers. Mutual interest, therefore, disposed
them to support the king, and the king to sup-

106 THE NATURE AND CAUSES OF BOOK ill.

port them against the lords. They were the
enemies of his enemies, and it was his interest to
render them as secure and independent of those
enemies as he could. By granting them magi
strates of their own, the privilege of making
by laws for their own government, that of
building walls for their own defence, and that of
reducing all their inhabitants under a sort of mi
litary discipline, he gave them all the means of
security and independency of the barons which
it was in his power to bestow. Without the
establishment of some regular government of
this kind, without some authority to compel
their inhabitants to act according to some cer
tain plan or system, no voluntary league of mu
tual defence could either have afforded them any
permanent security, or have enabled them to
give the king any considerable support. By
granting them the farm of their town in
fee, he took away from those whom he wished
to have for his friends, and, if one may say so,
for his allies, all ground of jealousy and suspi
cion, that he was ever afterwards to oppress
them, either by raising the farm rent of their
town, or by granting it to some other farmer.

The princes who lived upon the worst terms
with their barons, seem accordingly to have been
the most liberal in grants of this kind to their
burghs. King John of England, for example,
appears to have been a most munificent bene
factor to his town*. Philip the First of France
lost all authority over his barons. Towards the
* See Madox.

CHAP. III. THE WEALTH OF NATIONS. 107

end of his reign, his son Lewis, known after
wards by the name of Lewis the Fat, consulted,
according to Father Daniel, with the bishops of
the royal demesnes, concerning the most proper
means of restraining the violence of the great
lords. Their advice consisted of two different
proposals. One was to erect a new order of
jurisdiction, by establishing magistrates and a
town-council, in every considerable town of his
demesnes. The other was to form a new militia,
by making the inhabitants of those towns, under
the command of their own magistrates, march
out upon proper occasions to the assistance of
the king. It is from this period, according to
the French antiquarians, that we are to date
the institution of the magistrates and councils
of cities in France. It was during the unpro-
sperous reigns of the princes of the house of
Suabia that the greater part of the free towns
of Germany received the first grants of their
privileges, and that the famous Hanseatic league
first became formidable*.

The militia of the cities seems, in those times,
not to have been inferior to that of the country,
and as they could be more readily assembled
upon any sudden occasion, they frequently had
the advantage in their disputes with the neigh
bouring lords. In countries, such as Italy and
Switzerland, in which, on account either of
their distance from the principal seat of govern
ment, of the natural strength of the country
* See Pfeffel.

108 THE NATURE AND CAUSES OF HOOK ill.

itself, or of some other reason, the sovereign
came to lose the whole of his authority, the
cities generally became independent republics,
and conquered all the nobility in their neigh
bourhood ; obliging them to pull down their
castles in the country, and to live, like other
peaceable inhabitants, in the city. This is the
short history of the republic of Berne, as well
as of several other cities in Switzerland. If you
except Venice, for of that city the history is
somewhat different, it is the history of all the
considerable Italian republics, of which so great
a number arose and perished, between the end
of the twelfth and the beginning of the sixteenth
century.

In countries such as France or England, where
the authority of the sovereign, though frequently
very low, never was destroyed altogether, the
cities had no opportunity of becoming entirely
independent. They became, however, so con-
siderable, that the sovereign could impose no tax
upon them, besides the stated farm-rent of the
town, without their own consent. They were,
therefore, called upon to send deputies to the
general assembly of the states of the kingdom,
where they might join with the clergy and the
barons in granting, upon urgent occasions, some
extraordinary aid to the king. Being generally
too more favourable to his power, their deputies
seem, sometimes, to have been employed by him
as a counter-balance in those assemblies to the
authority of the great lords. Hence the origin

CHAP. in. THE WEALTH OF NATIONS. 109

of the representation of burghs in the states
general of all great monarchies in Europe.

Order and good government, and along with
them the liberty and security of individuals,
were, in this manner, established in cities, at a
time when the occupiers of land in the country
were exposed to every sort of violence. But men
in this defenceless state naturally content them
selves with their necessary subsistence; because
to acquire more might only tempt the injustice
of their oppressors. On the contrary, when they
are secure of enjoying the fruits of their industry,
they naturally exert it to better their condition,
and to acquire not only the necessaries, but the
conveniences and elegancies of life. That in
dustry, therefore, which aims at something more
than necessary subsistence, was established in
cities long before it was commonly practised by
the occupiers of land in the country. If in the
lands of a poor cultivator, oppressed with the
servitude of villanage, some little stock should
accumulate, he would naturally conceal it with
great care from his master, to whom it would
otherwise have belonged, and take the first op
portunity of running away to a town. The law
was at that time so indulgent to the inhabitants
of towns, and so desirous of diminishing the au
thority of the lords over those of the country,
that if he could conceal himself there from the
pursuit of his lord for a year, he was free for
ever. Whatever stock, therefore, accumulated
in the hands of the industrious part of the inha
bitants of the country, naturally took refuge in

110 THE NATURE AND CAUSES OF BOOK ill.

cities, as the only sanctuaries in which it could
be secure to the person that acquired it.

The inhabitants of a city, it is true, must
always ultimately derive their subsistence, and
the whole materials and means of their industry,
from the country. But those of a city, situated
near either the sea-coast or the banks of a navi
gable river, are not necessarily confined to derive
them from the country in their neighbourhood.
They have a much wider range, and may draw
them from the most remote corners of the world,
either in exchange for the manufactured produce
of their own industry, or by performing the
office of carriers between distant countries, and
exchanging the produce of one for that of an
other. A city might in this manner grow up to
great wealth and splendor, while not only the
country in its neighbourhood, but all those to
which it traded, were in poverty and wretched
ness. Each of those countries, perhaps, taken
singly, could afford it but a small part, either of
its subsistence, or of its employment ; but all of
them taken together could afford it both a great
subsistence, and a great employment. There was,
however, within the narrow circle of the com
merce of those times, some countries that were
opulent and industrious. Such was the Greek
empire as long as it subsisted, and that of the
Saracens during the reigns of the Abassides.
Such too was Egypt till it was conquered by the
Turks, some part of the coast of Barbary, and
all those provinces of Spain which were under
the government of the Moors.

CHAP. in. THE WEALTH OF NATIONS. 1 1 1

The cities of Italy seem to have been the first
in Europe which were raised by commerce to any
considerable degree of opulence. Italy lay in the
centre of what was at that time the improved and
civilized part of the world. The crusades too,
though by the great waste of stock and destruc
tion of inhabitants which they occasioned, they
must necessarily have retarded the progress of
the greater part of Europe, were extremely fa
vourable to that of some Italian cities. The
great armies, which marched from all parts to the
conquest of the Holy Land, gave extraordinary
encouragement to the shipping of Venice, Genoa,
and Pisa, sometimes in transporting them thither,
and always in supplying them with provisions.
They were the commissaries, if one may say so,
of those armies ; and the most destructive frenzy
that ever befel the European nations, was a
source of opulence to those republics.

The inhabitants of trading cities, by import
ing the improved manufactures and expensive
luxuries of richer countries, afforded some food
to the vanity of the great proprietors, who
eagerly purchased them with great quantities of
the rude produce of their own lands. The com-
merce of a great part of Europe in those times,
accordingly, consisted chiefly in the exchange of
their own rude, for the manufactured produce
of more civilized nations. Thus the wool of
England used to be exchanged for the wines of
France, and the fine cloths of Flanders, in the
same manner as the corn in Poland is at this

112 THE NATURE AND CAUSES OF BOOK III,

day exchanged for the wines and brandies of
France, and for the silks and velvets of France
and Italy.

A taste for the finer and more improved
manufactures, was in this manner introduced by
foreign commerce into countries where no such
works were carried on. But when this taste
became so general as to occasion a considerable
demand, the merchants, in order to save the ex
pense of carnage, naturally endeavoured to esta
blish some manufactures of the same kind in their
own country. Hence the origin of the first ma
nufactures for distant sale that seem to have been
established in the western provinces of Europe,
after the fall of the Roman empire.

No large country, it must be observed, ever
did or could subsist without some sort of manu
factures being carried on in it ; and when it is
said of any such country that it has no manu
factures, it must always be understood of the
finer and more improved, or of such as are fit
for distant sale. In every large country, both
the clothing and household furniture of the far
greater part of the people, are the produce of
their own industry. This is even more univer
sally the case in those poor countries which are
commonly said to have no manufactures, than in
those rich ones that are said to abound in them.
In the latter, you will generally find, both in the
clothes and household furniture of the lowest
rank of people, a much greater proportion of
foreign productions than in the former.

CHAP. III. THE WEALTH OF NATIONS. 115

Those manufactures which are fit for distant
sale, seem to have been introduced into different
countries in two different ways.

Sometimes they have been introduced, in the
manner above mentioned, by the violent opera
tion, if one may say so, of the" stocks of parti
cular merchants and undertakers, who established
them in imitation of some foreign manufactures
of the same kind. Such manufactures, there
fore, are the offspring of foreign commerce, and
such seem to have been the ancient manufactures
of silks, velvets, and brocades, which flourished
in Lucca, during the thirteenth century. They
were banished from thence by the tyranny of one
of Machiavel's heroes, Castruccio Castracani.
In 1310, nine hundred families were driven out
of Lucca, of whom thirty-one retired to Venice,
and offered to introduce there the silk manu
facture*. Their offer was accepted, many pri
vileges were conferred upon them, arid they be
gan the manufacture with three hundred work
men. Such too seem to have been the manu
factures of fine cloths that anciently flourished in
Flanders, and which were introduced into Eng
land in the beginning of the reign of Elizabeth ;
and such are the present silk manufactures of
Lyons and Spital-fields. Manufactures intro
duced in this manner are generally employed
upon foreign materials, being imitations of fo
reign manufactures. When the Venetian manu-

* See Sandi Istoria Civile de Vinezia, Part 2. vol. i, page
247, and 256.

VOL. II. I

THE NATURE AND CAUSES OF BOOK in-

facture was first established, the materials were
all brought from Sicily and the Levant. The
more ancient manufacture of Lucca was likewise
carried on with foreign materials. The cultiva
tion of mulberry trees, and the breeding of silk
worms, seem not to have been common in the
northern parts of Italy before the sixteenth cen
tury. Those arts were not introduced into
France till the reign of Charles IX. The ma
nufactures of Flanders were carried on chiefly
with Spanish and English wool. Spanish wool
was the material, not of the first woollen manu
facture of England, but of the first that was fit
for distant sale. More than one-half the mate
rials of the Lyons manufacture is at this day
foreign silk ; when it was first established, the
whole or very nearly the whole was so. No part
of the materials of the Spital-fields manufacture
is ever likely to be the produce of England.
The seat of such manufactures, as they are ge
nerally introduced by the scheme and project of
a few individuals, is sometimes established in a
maritime city, and sometimes in an inland town,
according as their interest, judgment, or caprice
happen to determine.

At other times manufactures for distant sale
grow up naturally, and as it were of their own
accord, by the gradual refinement of those
household and coarser manufactures which must
at all times be carried on even in the poorest and
rudest countries. Such manufactures are ge
nerally employed upon the materials which the
country produces, and they seem frequently to

CHAP. ill. THE WEALTH OF NATIONS. 115

have been first refined and improved in such
inland countries as were, not indeed at a very
great, but at a considerable distance from the
sea coast, and sometimes even from all water
carriage. An inland country, naturally fertile and
easily cultivated, produces a great surplus of pro
visions beyond what is necessary for maintaining
the cultivators, and on account of the expense
of land carriage, and inconveniency of river na
vigation, it may frequently be difficult to send
this surplus abroad. Abundance, therefore, ren
ders provisions cheap, and encourages a great
number of workmen to settle in the neighbour
hood, who find that their industry can there pro
cure them more of the necessaries and conve-
niencies of life than in other places. They work
up the materials of manufacture which the land
produces, and exchange their finished work,
or what is 'the same thing the price of it, for
more materials and provisions. They give a new
value to the surplus part of the rude produce,
by saving the expense of carrying it to the water
side, or to some distant market; and they furnish
the cultivators with something in exchange for
it that is either useful or agreeable to them,
upon easier terms than they could have obtained
it before. The cultivators get a better price for
their surplus produce, and can purchase cheaper
other conveniencies which they have occasion
fof; They are thus both encouraged and en
abled to increase this surplus produce by a further
improvement and better cultivation of the land;
and as the fertility of the land had given birth

116 THE NATURE AND CAUSES OF BOOK in.

to the manufacture, so the progress of the manu
facture re-acts upon the land, and increases still
further its fertility. The manufacturers first
supply the neighbourhood, and afterwards, as
their work improves and refines, more distant
markets. For though neither the rude produce,
nor even the coarse manufacture, could, without
the greatest difficulty, support the expense of a
considerable land carriage, the refined and im
proved manufacture easily may. In a small
bulk it frequently contains the price of a great
quantity of rude produce, A piece of fine cloth,
for example, which weighs only eighty pounds,
contains in it, the price, not only of eighty
pounds weight of wool, but sometimes of several
thousand weight of corn, the maintenance of the
different working people, and of their immediate
employers. The corn which could with diffi
culty have been carried abroad in its own shape,
is in this manner virtually exported in that of the
complete manufacture, and may easily be sent to
the remotest corners of the world. In this man
ner have grown up naturally, and as it were of
their own accord, the manufactures of Leeds,
Halifax, Sheffield, Birmingham, and Wolver-
hampton. Such manufactures are the offspring
of agriculture. In the modern history of Eu
rope, their extension and improvement have ge
nerally been posterior to those which were the
offspring of foreign commerce. England was
noted for the manufacture of fine cloths made of
Spanish wool, more than a century before any of
those which now flourish in the places above

CHAP. IV. THE WEALTH OF NATIONS. 117

mentioned were fit for foreign sale. The exten
sion and improvement of these last could not
take place but in consequence of the extension
and improvement of agriculture, the last and
greatest effect of foreign commerce, and of the
manufactures immediately introduced by it, and
which I shall now proceed to explain.

CHAPTER IV.

How the Commerce of the Towns contributed to
the Improvement of the Country.

THE increase and riches of commercial and
manufacturing towns, contributed to the im
provement and cultivation of the countries to
which they belonged, in three different ways.

First, by affording a great and ready market
for the rude produce of the country, they gave
encouragement to its cultivation and further im
provement. This benefit was not even confined
to the countries in which they were situated,
but extended more or less to all those with which
they had any dealings. To all of them they
afforded a market for some part either of their
rude or manufactured produce, and consequently
gave some encouragement to the industry and
improvement of all. Their own country, how
ever, on account of its neighbourhood, necessa
rily derived the greatest benefit from this market.

118 THE NATURE AND CAUSES OF BOOK in.

Its rude produce being charged with less car
riage, the traders could pay the growers a better
price for it, and yet afford it as cheap to the con
sumers as that of more distant countries.

Secondly, the wealth acquired by the inhabit
ants of cities was frequently employed in pur
chasing such lands as were to be sold, of which
a great part would frequently be uncultivated.
Merchants are commonly ambitious of becoming
country gentlemen, and when they do, they are
generally the best of all improvers. A merchant
is accustomed to employ his money chiefly in
profitable projects ; whereas a mere country gen
tleman is accustomed to employ it chiefly in
expense. The one often sees his money go from
him, and return to him again with a profit : the
other, when once he parts with it, very seldom
expects to see any more of it. Those different
habits naturally affect their temper and dispo
sition in every sort of business. A merchant is
commonly a bold ; a country gentleman, a timid
undertaker. The one is not afraid to lay out at
once a large capital upon the improvement of
his land, when he has a probable prospect of
raising the value of it in proportion to the ex
pense. The other, if he has any capital, which
is not always the case, seldom ventures to employ
it in this manner. If he improves at all, it is
commonly not with a capital, but with what he
can save out of his annual revenue. Whoever
has had the fortune to live in a mercantile town
situated in an unimproved country, must have
frequently observed how much more spirited

CHAP. iv. THE WEALTH OF NATIONS. 119

the operations of merchants were in this way,
than those of mere country gentlemen. The
habits, Besides, of order, ceconomy, and atten
tion, to which mercantile business naturally
forms a merchant, render him much fitter to
execute, with profit and success, any project of
improvement.

Thirdly, and lastly, commerce and manufac
tures gradually introduced order and good go
vernment, and with them, the liberty and secu
rity of individuals, among the inhabitants of the
country, who had before lived almost in a con
tinual state of war with their neighbours, and of
servile dependency upon their superiors. This,
though it has been the least observed, is by far
the most important of all their effects. Mr.
Hume is the only writer who, so far as I know,
has hitherto taken notice of it.

In a country which has neither foreign com
merce, nor any of the finer manufactures, a great
proprietor, having nothing for which he can ex
change the greater part of the produce of his
lands which is over and above the maintenance
of the cultivators, consumes the whole in rustic
hospitality at home. If this surplus produce is
sufficient to maintain a hundred or a thousand
men, he can make use of it in no other way than
by maintaining a hundred or a thousand men.
He is at all times, therefore, surrounded with a
multitude of retainers and dependents, who hav
ing no equivalent to give in return for their main
tenance, but being fed entirely by his bounty,
must obey him, for the same reason that soldiers

120 THE NATURE AND CAUSES OF COOK III,

must obey the prince who pays them. Before
the extension of commerce and manufactures
in Europe, the hospitality of the rich and the
great, from the sovereign down to the smallest
baron, exceeded every thing which in the pre
sent times we can easily form a notion of. West
minster-hall was the dining-room of William
Rufus, and might frequently, perhaps, not be
too large for his company. It was reckoned a
piece of magnificence in Thomas Becket, that
he strewed the floor of his hall with clean hay or
rushes in the season, in order that the knights and
squires, who could not get seats, might not spoil
their fine clothes when they sat down on the floor
to eat their dinner. The great earl of Warwick
is said to have entertained every day at his differ
ent manors, thirty thousand people; and though
the number here may have been exaggerated, it
must, however, have been very great to admit
of such exaggeration. A hospitality nearly of
the same kind was exercised not many years ago
in many different parts of the highlands of Scot
land. It seems to be common in all nations to
whom commerce and manufactures are little
known. I have seen, says Doctor Pocock, an
Arabian chief dine in the streets of a town where
he had come to sell his cattle, and invite all
passengers, even common beggars, to sit down
with him and partake of his banquet.

The occupiers of land were in every respect
as dependent upon the great proprietor as his
retainers, even such of them as were not in a
state of villanage, mere tenants at will, who paid

CHAP. iv. THE WEALTH OF NATIONS. 121

a rent in no respect equivalent to the subsistence
which the land afforded them. A crown, half a
crown, a sheep, a lamb, was some years ago in
the highlands of Scotland, a common rent for
lands which maintained a family. In some places
it is so at this day ; nor will money at present
purchase a greater quantity of commodities there
than in other places. In a country where the
surplus produce of a large estate must be con
sumed upon the estate itself, it will frequently be
more convenient for the proprietor, that part of
it be consumed at a distance from his own house,
provided they who consume it are as dependent
upon him as either his retainers or his menial
servants. He is thereby saved from the embar
rassment of either too large a company or too
large a family. A tenant at will, who possesses
land sufficient to maintain his family for little
more than a quit-rent, is as dependent upon the
proprietor as any servant or retainer whatever,
and must obey him with as little reserve. Such
a proprietor, as he feeds his servants and re
tainers at his own house, so he feeds his tenants
at their houses. The subsistence of both is de
rived from his bounty, and its cqjrtinuance de
pends upon his good pleasure.

Upon the authority which the great proprie
tors necessarily had in such a state of things
over their tenants and retainers, was founded the
power of the ancient barons. They necessarily
became the judges in peace, and the leaders in
war, of all who dwelt upon their estates. They
could maintain order and execute the law within

THE NATURE AND CAUSES OF BOOK m

their respective demesnes, because each of them
could there turn the whole force of all the in
habitants against the injustice of any one. No
other person had sufficient authority to do this.
The king in particular had not. In those ancient
times he was little more than the greatest pro
prietor in his dominions, to whom, for the sake
of common defence against their common ene
mies, the other great proprietors paid certain
respects. To have enforced payment of a small
debt within the lands of a great proprietor, where
all the inhabitants were armed and accustomed
to stand by one another, would have cost the
king, had he attempted it by his own authority,
almost the same effort as to extinguish a civil
war. He was, therefore, obliged to abandon the
administration of justice, through the greater
part of the country, to those who were capable
of administering it ; and for the same reason to
leave the command of the country militia to
those whom that militia would obey.

It is a mistake to imagine that those territo
rial jurisdictions took their origin from the
feudal law. Not only the highest jurisdictions,
both civil and ^criminal, but the power of levy
ing troops, of coining money, and even that of
making by-laws for the government of their
own people, were all rights possessed allodially
by the great proprietors of land several cen
turies before even the name of the feudal law
was known in Europe. The authority and juris-
diction of the Saxon lords in England, appear
to have been as great before the conquest, as

CHAl'. IV. THE WEALTH OF NATIONS. 123

that of any of the Norman lords after it. But
the feudal law is not supposed to have become
the common law of England till after the con
quest. That the most extensive authority and
jurisdictions were possessed by the great lords
in France allodially, long before the feudal law
was introduced into that country, is a matter of
fact that admits of no doubt. That authority
and those jurisdictions all necessarily flowed
from the state of property and manners just now
described. Without remounting to the remote
antiquities of either the French or English
monarchies, we may find in much later times
many proofs that such effects must always flow
from such causes. It is not thirty years ago
since Mr. Cameron of Lochiel, a gentleman of
Lochaber in Scotland, without any legal war
rant whatever, not being what was then called
a lord of regality, nor even a tenant in chief,
but a vassal of the duke of Argyle, and without
being so much as a justice of peace, used, not
withstanding, to exercise the highest criminal
jurisdiction over his own people. He is said to
have done so with great equity, though without
any of the formalities of justice; and it is not
improbable that the state of that part of the coun
try at that time made it necessary for him to
assume this authority in order to maintain the
public peace. That gentleman; whose rent
never exceeded five hundred pounds a year,
carried, in 1745, eight hundred of his own peo
ple into the rebellion with him.

THE NATURE AND CAUSES OF BOOK ill.

The introduction of the feudal law, so far
from extending, may be regarded as an attempt
to moderate the authority of the great allodial
lords. It established a regular subordination,
accompanied with a long train of services and
duties, from the king down to the smallest pro
prietor. During the minority of the proprietor,
the rent, together with the management of his
lands, fell into the hands of his immediate supe
rior, and, consequently, those of all great pro
prietors into the hands of the king, who was
charged with the maintenance and education of
the pupil, and who, from his authority as guar
dian, was supposed to have a right of disposing
of him in marriage, provided it was in a manner
not unsuitable to his rank. But though this in
stitution necessarily tended to strengthen the
authority of the king, and to weaken that of the
great proprietors, it could not do either suf
ficiently for establishing order and good govern
ment among the inhabitants of the country; be
cause it could not alter sufficiently that state of
property and manners from which the disorders
arose. The authority of government still con
tinued to be, as before, too weak in the head
and too strong in the inferior members, and the
excessive strength of the inferior members was
the cause of the weakness of the head. After
the institution'of feudal subordination, the king
was as incapable of restraining the violence of
the great lords as before. They still continued
to make war according to their own discretion.

CHAP. IV. THE WEALTH OF NATIONS. 125

almost continually upon one another, and very
frequently upon the king; and the open country
still continued to be a scene of violence, rapine,
and disorder.

But what all the violence of the feudal insti
tutions could never have effected, the silent and
in sensible operation of foreign commerce and ma
nufactures gradually brought about. These gra
dually furnished the great proprietors with some
thing for which they could exchange the whole
surplus produce of their lands, and which they
could consume themselves without sharing it
either with tenants or retainers. All for our
selves, and nothing for other people, seems, in
every age of the world, to have been the vile
maxim of the masters of mankind. As soon,
therefore, as they could find a method of con
suming the whole value of their rents themselves,
they had no disposition to share them with any
other persons. For a pair of diamond buckles,
perhaps, or for something as frivolous and use
less, they exchanged the maintenance, or what
is the same thing, the price of the maintenance
of a thousand men for a ye#r, and with it the
whole weight and authority which it could give
them. The buckles, however, were to be all
their own, and no other human creature was to
have any share of them ; whereas in the more
ancient method of expense they must have shared
with at least a thousand people. With the judges
that were to determine the preference, this dif
ference was perfectly decisive ; and thus, for the
gratification of the most childish, the meanest,

126 THE NATURK AND CAUSES OF BOOK III.

and the most sordid of all vanities, they gradually
bartered their whole power and authority.

In a country where there is no foreign com
merce, nor any of the finer manufactures, a man
of ten thousand a year cannot well employ his
revenue in any other way than in maintaining,
perhaps, a thousand families, who are all of them
necessarily at his command. In the present state
of Europe, a man of ten thousand a year can
spend his whole revenue, and he generally does
so, without directly maintaining twenty people,
or being able to command more than ten foot
men not worth the commanding. Indirectly,
perhaps, he maintains as great, or even a greater,
number of people than he could have done by
the ancient method of expense. For though the
quantity of precious productions for which he
exchanges his whole revenue be very small, the
number of workmen employed in collecting and
preparing it, must necessarily have been very
great. Its great price generally arises from the
wages of their labour, and the profits of all their
immediate employers. By paying that price he
indirectly pays all those wages and profits, and
thus indirectly contributes to the maintenance of
all the workmen and their employers. He ge
nerally contributes, however, but a very small
proportion to that of each, to very few perhaps
a tenth, to many not a hundredth, and to some
not a thousandth, nor even a ten thousandth part
of their whole annual maintenance. Though he
contributes, therefore, to the maintenance of
them all, they are all more or less independent

CHAP. IV. THE WEALTH OF NATIONS.

of him, because generally they can all be main
tained without him.

When the great proprietors of land spend
their rents in maintaining their tenants and re
tainers, each of them maintains entirely all his
own tenants and all his own retainers. But when
they spend them in maintaining tradesmen and
artificers, they may, all of them taken together,
perhaps, maintain as great, or, on account of the
waste which attends rustic hospitality, a greater
number of people than before. Each of them,
however, taken singly, contributes often but a
very small share to the maintenance of any indi
vidual of this greater number. Each tradesman
or artificer derives his subsistence from the em
ployment, not of one, but of a hundred or a
thousand different customers. Though in some
measure obliged to them all therefore, he is not
absolutely dependent upon any one of them.

The personal expense of the great proprietors
having in this manner gradually increased, it was
impossible that the number of their retainers
should not as gradually diminish, till they were
at last dismissed altogether. The same cause
gradually led them to dismiss the unnecessary
part of their tenants. Farms were enlarged, and
the occupiers of land, notwithstanding the com
plaints of depopulation, reduced to the number
necessary for cultivating it, according to the im
perfect state of cultivation and improvement in
those times. By the removal of the unnecessary
mouths, and by exacting from the farmer the
full value of the farm, a greater surplus, or what

128 THE NATURE AND CAUSES OF BOOK III,

is the same thing, the price of a greater surplus,
was obtained for the proprietor, which the mer
chants and manufacturers soon furnished him
with a method of spending upon his own person*
in the same manner as he had done the rest.
The same cause continuing to operate, he was
desirous to raise his rents above what his lands,
in the actual state of their improvement, could
afford. His tenants could agree to this upon
one condition only, that they should be secured
in their possession, for such a term of years as
might give them time to recover with profit
whatever they should lay out in the further im
provement of the land. The expensive vanity
of the landlord made him willing to accept of
this condition ; and hence the origin of long
leases.

Even a tenant at will, who pays the full value
of the land, is not altogether dependent upon the
landlord. The pecuniary advantages which they
receive from one another, are mutual and equal,
and such a tenant will expose neither his life nor
his fortune in the service of the proprietor. But
if he has a lease for a long term of years, he is
altogether independent ; and his landlord must
not expect from him even the most trifling ser
vice beyond what is either expressly stipulated
in the lease, or imposed upon him by the com
mon and known law of the country.

The tenants having in this manner become
independent, and the retainers being dismissed,
the great proprietors were no longer capable of
interrupting the regular execution of justice, or

CHAP. IV. THE WEALTH OF NATIONS. 129

of disturbing the peace of the country. Having
sold their birth-right, not like Esau for a mess
of pottage in time of hunger and necessity, but
in the wantonness of plenty, for trinkets and
baubles, fitter to be the play-things of children
than the serious pursuits of men, they became as
insignificant as any substantial burgher or trades
man in a city. A regular government was esta
blished in the country as well as in the city,
nobody having sufficient power to disturb its
operations in the one, any more than in the
other.

It does not, perhaps, relate to the present sub
ject, but I cannot help remarking it, that very
old families, such as have possessed some con
siderable estate from father te son for many suc
cessive generations, are very rare in commercial
countries. In countries which have little com
merce, on the contrary, such as Wales, or the
highlands of Scotland, they are very common.
The Arabian histories seem to be all full of ge
nealogies, and there is a history written by a Tar
tar Khan, which has been translated into several
European languages, and which contains scarce
any thing else; a proof that ancient families are
very common among those nations. In countries
where a rich man can spend his revenue in no
other way than by maintaining as many people
as it can maintain, he is not apt to run out, and
his benevolence it seems is seldom so violent as
to attempt to maintain more than he can afford.
But where he can spend the greatest revenue
upon his own person, he frequently has no

VOL. II. K

130 THE NATURE AND CAUSES OF BOOK III.

bounds to his expense, because he frequently
has no bounds to his vanity, or to his affection
for his own person. In commercial countries,
therefore, riches, in spite of the most violent re
gulations of law to prevent their dissipation, very
seldom remain long in the same family. Among
simple nations, on the contrary, they frequently
do without any regulations of law: for among
nations of shepherds, such as the Tartars and
Arabs, the consumable nature of their property
necessarily renders all such regulations impos
sible.

A revolution of the greatest importance to the
public happiness, was in this manner brought
about by two different orders of people, who had
not the least intention to serve the public. To
gratify the most childish vanity was the sole mo
tive of the great proprietors. The merchants and
artificers, much less ridiculous, acted merely from
a view to their own interest, and in pursuit of
their own pedlar principle of turning a penny
wherever a penny was to be got. Neither of
them had either knowledge or foresight of that
great revolution which the folly of the one, and
the industry of the other, was gradually bring-
ing about.

It is thus that through the greater part of
Europe the commerce and manufactures of
cities, instead of being the effect, have been the
cause and occasion of the improvement and cul
tivation of the country.

This order, however, being contrary to the
natural course of things, is necessarily both slow

CHAP. iv. THE WEALTH OF NATIONS. 131

and uncertain. Compare the slow progress of
those European countries of which the wealth
depends very much upon their commerce and
manufactures, with the rapid advances of our
North American colonies, of which the wealth
is founded altogether in agriculture. Through
the greater part of Europe the number of in
habitants is not supposed to double in less than
five hundred years. In several of our North
American colonies, it is found to double in
twenty or five-and-twenty years. In Europe,
the law of primogeniture, and perpetuities of
different kinds, prevent the division of great
estates, and thereby hinder the multiplication of
small proprietors. A small proprietor, however,
who knows every part of his little territory,
views it with all the affection which property,
especially small property, naturally inspires, and
who upon that account takes pleasure not only
in cultivating but in adorning it, is generally of
all improvers the most industrious,, the most in
telligent, and the most successful. The same
regulations, besides, keep so much land out of
the market, that there are always more capitals
to buy than there is land to sell, so that what is
sold always sells at a monopoly price. The rent
never pays the interest of the purchase money,
and is besides burdened with repairs and other
occasional charges, to which the interest of mo
ney is not liable. To purchase land is every
where in Europe a most unprofitable employ
ment of a small capital. For the sake of the
superior security indeed, a man of moderate cir-

K 2

132 THE NATURE AND CAUSES OF BOOK III.

cumstances, when he retires from business, will
sometimes choose to lay out his little capital in
land. A man of profession too, whose revenue
is derived from another source, often loves to
secure his savings in the same way. But a young
man, who, instead of applying to trade or to
some profession, should employ a capital of two
or three thousand pounds in the purchase and
cultivation of a small piece of land, might in
deed expect to live very happily, and very in
dependently, but must bid adieu, for ever, to all
hope of either great fortune or great illustration,
which by a different employment of his stock he
might have had the same chance of acquiring
with other people. Such a person too, though
he cannot aspire at being a proprietor, will often
disdain to be a farmer. The small quantity of
land, therefore, which is brought to market, and
the high price of what is brought thither, pre
vents a great number of capitals from being em
ployed in its.cultivation and improvement which
would otherwise have taken that direction. In
North America, on the contrary, fifty or sixty
pounds is often found a sufficient stock to begin
a plantation with. The purchase and improve
ment of uncultivated land, is there the most
profitable employment of the smallest as well as
of the greatest capitals, and the most direct
road to all the fortune and illustration which
can be acquired in that country. Such land,
indeed, is in North America to be had almost
for nothing, or at a price much below the value
of the natural produce; a thing impossible in

CHAP. IV. THE WEALTH OF NATIONS. 133

Europe, or indeed, in any country where all
lands have long been private property. If
landed estates, however, were divided equally
among all the children, upon the death of any
proprietor who left a numerous family, the estate
would generally be sold. So much land would
come to market, that it could no longer sell at
a monopoly price, The free rent of the land
would go nearer to pay the interest of the pur
chase-money, and a small capital might be em
ployed in purchasing land as profitably as in any
other way.

England, on account of the natural fertility
of the soil, of the great extent of the sea-coasf in
proportion to that of the whole country, and of
the many navigable rivers which run through it,
and aiford the conveniency of water carriage to
some of the most inland parts of it, is perhaps as
well fitted by nature as any large country in Eu
rope, to be the seat of foreign commerce, of ma
nufactures for distant sale, and of all the im
provements which these can occasion. From the
beginning of the reign of Elizabeth too, the
English legislature has been peculiarly attentive
to the interest of commerce and manufactures,
and in reality there is no country in Europe,
Holland itself not excepted, of which the law is,
upon the whole, more favourable to this sort of
industry. Commerce and manufactures have ac
cordingly been continually advancing during all
this period. The cultivation and improvement
of the country has, no doubt, been gradually
advancing too: but it seems to have followed

134 THE NATURE AND CAUSES OF BOOK ill.

slowly, and at a distance, the more rapid pro
gress of commerce and manufactures. The
greater part of the country must probably have
been cultivated before the reign of Elizabeth;
and a very great part of it still remains uncul
tivated, and the cultivation of the far greater
part, much inferior to what it might be. The
law of England, however, favours agriculture
not only indirectly by the protection of com
merce, but by several direct encouragements.
Except in times of scarcity, the exportation of
corn is not only free, but encouraged by a
bounty. In times of moderate plenty, the im
portation of foreign corn is loaded with duties
that amount to a prohibition. The importation
of live cattle, except from Ireland, is prohibited
at all times, and it is but of late that it was per
mitted from thence. Those who cultivate the
land, therefore, have a monopoly against their
countrymen for the two greatest and most im
portant articles of land produce, bread and
butchers' meat. These encouragements, though,
at bottom, perhaps, as I shall endeavour to show
hereafter, altogether illusory, sufficiently de
monstrate at least the good intention of the le
gislature to favour agriculture. But what is of
much more importance than all of them, the
yeomanry of England are rendered as secure, as
independent, and as respectable as law can make
them. No country, therefore, in which the right
of primogeniture takes place, which pays tithes,
and where perpetuities, though contrary to the
spirit of the law, are admitted in some cases, can

CHAP, IV. THE WEALTH OF NATIONS. 135

give more encouragement to agriculture than
England. Such, however, notwithstanding, is
the state of its cultivation. What would it have
been, had the law given no direct encourage
ment to agriculture besides what arises indirectly
from the progress of commerce, and had left the
yeomanry in the same condition as in most other
countries of Europe ? It is now more than two
hundred years since the beginning of the reign
of Elizabeth, a period as long as the course of
human prosperity usually endures.

France seems to have had a considerable share
of foreign commerce near a century before Eng
land was distinguished as a commercial country.
The marine of France was considerable, accord
ing to the notions of the times, before the expe
dition of Charles the VHIth to Naples. The
cultivation and improvement of France, how
ever, is, upon the whole, inferior to that of Eng
land. The law of the country has never given
the same direct encouragement to agriculture.
The foreign commerce of Spain and Portugal
to the other parts of Europe, though chiefly
carried on in foreign ships, is very considerable.
That to their colonies is carried on in their own,
and is much greater on account of the great
riches and extent of those colonies. But it has
never introduced any considerable manufactures
for distant sale into either of those countries,
and the greater part of both still remains uncul
tivated. The foreign commerce of Portugal is
of older standing than that of any great country
in Europe, except Italy.

136 THE NATURE AND CAUSES OF BOOK III.

Italy is the only great country of Europe
which seems to have been cultivated and im
proved in every part, by means of foreign com
merce and manufactures for distant sale. Before
the invasion of Charles the Vlllth, Italy, ac
cording to Guicciardin, was cultivated not less
in the most mountainous and barren parts of the
country, than in the plainest and most fertile.
The advantageous situation of the country, and
the great number of independent states which
at that time subsisted in it, probably contributed
not a little to this general cultivation. It is
not impossible too, notwithstanding this general
expression of one of the most judicious and re
served of modern historians, that Italy was not
at that time better cultivated than England is at
present.

The capital, however, that is acquired to any
country by commerce and manufactures, is all a
very precarious and uncertain possession, till
some part of it has been secured and realized in
the cultivation and improvement of its lands. A
merchant, it has been said very properly, is not
necessarily the citizen of any particular country.
It is in a great measure indifferent to him from
what place he carries on his trade; and a very
trifling disgust will make him remove his capital,
and together with it all the industry which it
supports, from one country to another. No part
of it can be said to belong to any particular
country, till it has been spread as it were over
the face of that country, either in buildings, or
in the lasting improvement of lands. No vestige

CHAP. IV. THE WEALTH OF NATIONS. 137

now remains of the great wealth, said to have
been possessed by the greater part of the Hans
towns, except in the obscure histories of the
thirteenth and fourteenth centuries. It is even
uncertain where some of them were situated, or
to what towns in Europe the Latin names given
to some of them belong. But though the mis
fortunes of Italy in the end of the fifteenth and
beginning of the sixteenth centuries greatly di
minished the commerce and manufactures of the
cities of Lombardy and Tuscany, those countries
still continue to be among the most populous
and best cultivated in Europe. The civil wars
of Flanders, and the Spanish government which
succeeded them, chased away the great com
merce of Antwerp, Ghent, and Bruges. But
Flanders still continues to be one of the richest,
best cultivated, and most populous provinces of
Europe. The ordinary revolutions of war and
government easily dry up the sources of that
wealth which arises from commerce only. That
which arises from the more solid improvements
of agriculture, is much more durable, and can
not be destroyed but by those more violent con
vulsions occasioned by the depredations of hos
tile and barbarous nations continued for a cen
tury or two together; such as those that hap
pened for some time before and after the fall of
the Roman empire in the western provinces of
Europe.

138 THE NATURE AND CAUSES OF BOOK IV.

BOOK IV.

Of Systems of Political Economy.

INTRODUCTION.

POLITICAL economy, considered as a branch
of the science of a statesman or legislator, pro
poses two distinct objects: first, to provide a
plentiful revenue or subsistence for the people,
or more properly to enable them to provide such
a revenue or subsistence for themselves; and
secondly, to supply the state or commonwealth
with a revenue sufficient for the public services.
It proposes to enrich both the people and the
sovereign.

The different progress of opulence in differ
ent ages and nations, has given occasion to two
different systems of political economy, with re
gard to enriching the people. The one may be
called the system of commerce, the other that of
agriculture. I shall endeavour to explain both
as fully and distinctly as I can, and shall begin
with the system of commerce. It is the modern
system, and is best understood in our own
country and in our own times.

CHAP. I. THE WEALTH OF NATIONS. 139

CHAPTER I.

Of the Principle of the commercial, or mercantile
System.

THAT wealth consists in money, or in gold and
silver, is a popular notion which naturally arises
from the double function of money, as the in
strument of commerce, and as the measure of
value. In consequence of its being the instru
ment of commerce, when we have money we
can more readily obtain whatever else we have
occasion for, than by means of any other com
modity. The great affair, we always find, is to
get money. When that is obtained, there is no
difficulty in making any subsequent purchase.
In consequence of its being the measure of
value, we estimate that of all other commodities
by the quantity of money which they will ex
change for. We say of a rich man that he is
worth a great deal, and of a poor man that he is
worth very little money. A frugal man, or a
man eager to be rich, is said to love money ; and
a careless, a generous, or a profuse man, is said
to be indifferent about it. To grow rich is to
get money; and wealth and money, in short,
are, in common language, considered as in every
respect synonymous. '*•

A rich country, in the same manner as a rich
man, is supposed to be a country abounding in
money; and to heap up gold and silver in any

140 THE NATURE AND CAUSES OF BOOK IV.

country is supposed to be the readiest way to
enrich it. For some time after the discovery of
America, the first inquiry of the Spaniards,
when they arrived upon any unknown coast,
used to be, if there was any gold or silver to be
found in the neighbourhood ? By the informa
tion which they received, they judged whether
it was worth while to make a settlement there,
or if the country was worth the conquering.
Piano Carpino, a monk sent ambassador from
the king of France to one of the sons of the fa
mous Gengis Khan, says, that the Tartars used
frequently to ask him, if there was plenty of
sheep and oxen in the kingdom of France?
Their inquiry had the same object with that of
the Spaniards. They wanted to know if the
country was rich enough to be worth the con
quering. Among the Tartars, as among all other
nations of shepherds, who are generally ignorant
of the use of money, cattle are the instruments
of commerce and the measures of value. Wealth,
therefore, according to them, consisted in cattle,
as according to the Spaniards it consisted in
gold and silver. Of the two, the Tartar notion,
perhaps, was the nearest to the truth.

Mr. Locke remarks a distinction between
money and other moveable goods. All other
moveable goods, he says, are of so consumable
a nature that the wealth which consists in them
cannot be much depended on, and a nation
which abounds in them one year may, without
any exportation, but merely by their own waste
and extravagance, be in great want of them the

CHAP. I. THE WEALTH OF NATIONS. 141

next. Money, on the contrary, is a steady friend,
which, though it may travel about from hand to
hand, yet if it can be kept from going out of the
country, is not very liable to be wasted and con
sumed. Gold and silver, therefore, are, accord
ing to him, the most solid and substantial part of
the moveable wealth of a nation, and to multiply
those metals ought, he thinks, upon that account,
to be the great object of its political economy.
Others admit that if a nation could be sepa
rated from all the world, it would be of no con
sequence how much, or how little money circu
lated in it. The consumable goods which were
circulated by means of this money, would only
be exchanged for a greater or a smaller number
of pieces; but the real wealth or poverty of the
country, they allow, would depend altogether
upon the abundance or scarcity of those con
sumable goods. But it is otherwise, they think,
with countries which have connections with fo
reign nations, and which are obliged to carry
on foreign wars, and to maintain fleets and
armies in distant countries. This, they say,
cannot be done, but by sending abroad money
to pay them with ; and a nation cannot send
much money abroad, unless it has a good deal
at home. Every such nation, therefore, must
endeavour in time of peace to accumulate gold
and silver, that, when occasion requires, it may
have wherewithal to carry on foreign wars.

In consequence of these popular notions, all
the different nations of Europe have studied,
though to little purpose, every possible means

14$ THE NATURE AND CAUSES OF BOOK IV,

of accumulating gold and silver in their respect
ive countries. Spain and Portugal, the pro
prietors of the principal mines which supply
Europe with those metals, have either prohi
bited their exportation under the severest pe
nalties, or subjected it to a considerable duty.
The like prohibition seems anciently to have
made a part of the policy of most other Euro
pean nations. It is even to be found, where we
should least of all expect to find it, in some old
Scotch acts of parliament, which forbid under
heavy penalties the carrying gold or silver forth
of the kingdom. The like policy anciently took
place both in France and England.

When those countries became commercial,
the merchants found this prohibition, upon
many occasions, extremely inconvenient. They
could frequently buy more advantageously with
gold and silver than with any other commodity,
the foreign goods which they wanted, either to
import into their own, or to carry to some other
foreign country. They remonstrated, therefore,
against this prohibition as hurtful to trade.

They represented, first, that the exportation
of gold and silver in order to purchase foreign
goods, did not always diminish the quantity of
those metals in the kingdom. That, on the
contrary, it might frequently increase that quan
tity; because, if the consumption of foreign
goods wras not thereby increased in the country,
those goods might be re-exported to foreign
countries, and, being there sold for a large
profit, might bring back much more treasure

CHAP. I. THE WEALTH OF NATIONS. 143

than was originally sent out to purchase them.
Mr. Mun compares this operation of foreign
trade to the seed-time and harvest of agriculture.
" If we only behold," says he, " the actions of
" the husbandman in the seed-time, when he
" casteth away much good corn into the ground,
" we shall account him rather a madman than a
" husbandman. But when we consider his la-
" bours in the harvest, which is the end of his
" endeavours, we shall find the worth and plen-
" tiful increase of his actions."

They represented, secondly, that this prohi
bition could not hinder the exportation of gold
and silver, which, on account of the smallness of
their bulk in proportion to their value, could
easily be smuggled abroad. That this exporta
tion could only be prevented by a proper atten
tion to what they called the balance of trade.
That when the country exported to a greater
value than it imported, a balance became due
to it from foreign nations, which wras necessarily
paid to it in gold and silver, and thereby in
creased the quantity of those metals in the king
dom. But that when it imported to a greater
value than it exported, a contrary balance be
came due to foreign nations, which was ne
cessarily paid to them in the same manner, and
thereby diminished that quantity. That in this
case to prohibit the exportation of those metals
could not prevent it, but only by making it
more dangerous, render it more expensive. That
the exchange was thereby turned more against
the country which owed the balance, than it

144 THE NATURE AND CAUSES OF BOOK IV.

otherwise might have been ; the merchant who
purchased a bill upon the foreign country being
obliged to pay the banker who sold it, not only
for the natural risk, trouble, and expense of send
ing the money thither, but for the extraordinary
risk arising from the prohibition. But that the
more the exchange was against any country, the
more the balance of trade became necessarily
against it; the money of that country becoming
necessarily of so much less value, in comparison,
with that of the country to which the balance
was due. That if the exchange between Eng
land and Holland, for example, was five per
cent, against England, it would require a hun
dred and five ounces of silver in England to pur
chase a bill for a hundred ounces of silver in
Holland: that a hundred and five ounces of
silver in England, therefore, would be worth
only a hundred ounces of silver in Holland, and
would purchase only a proportionable quantity
of Dutch goods: but that a hundred ounces of
silver in Holland, on the contrary, would be
worth a hundred and five ounces in England,
and would purchase a proportionable quantity
of English goods: that the English goods which
were sold to Holland would be sold so much
cheaper, and the Dutch goods which were sold
to England, so much dearer, by the difference
of the exchange; that the one would draw so
much less Dutch money to England, and the
other so much more English money to Holland,
as this difference amounted to : and that the
balance of trade, therefore, would necessarily be

CHAP. I. THE WEALTH OF NATIONS. 145

so much more against England, and would re
quire a greater balance of gold and silver to be
exported to Holland.

Those arguments were partly solid and partly
sophistical. They were solid so far as they as
serted that the exportation of gold and silver in
trade might frequently be advantageous to the
country. They were solid too, in asserting that
no prohibition could prevent their exportation,
when private people found any advantage in ex
porting them. But they were sophistical in sup
posing, that either to preserve or to augment
the quantity of those metals required more the
attention of government, than to preserve or to
augment the quantity of any other useful com
modities, which the freedom of trade, without
any such attention, never fails to supply in the
proper quantity. They were sophistical too,
perhaps, in asserting that the high price of ex
change necessarily increased, what they called,
the unfavourable balance of trade, or occasioned
the exportation of a greater quantity of gold and
silver. That high price, indeed, was extremely
disadvantageous to the merchants who had any
money to pay in foreign countries. They paid
so much dearer for the bills which their bankers
granted them upon those countries. But though
the risk arising from the prohibition might occa
sion some extraordinary expense to the bankers,
it would not necessarily carry any more money
out of the country. This expense would gene
rally be all laid out in the country, in smuggling
the money out of it, and could seldom occasion

VOL. II. L

146 THE NATURE AND CAUSES OF BOOK iv.

the exportation of a single six-pence beyond the
precise sum drawn for. The high price of ex
change too would naturally dispose the mer
chants to endeavour to make their exports
nearly balance their imports, in order that they
might have this high exchange to pay upon as
small a sum as possible. The high price of ex
change, besides, must necessarily have operated
as a tax, in raising the price of foreign goods,
and thereby diminishing their consumption. It
would tend, therefore, not to increase, but to
diminish, what they called, the unfavourable
balance of trade, and consequently the exporta
tion of gold and silver.

Such as they were, however, those arguments
convinced the people to whom they were ad
dressed. They were addressed by merchants to
parliaments, and to the councils of princes, to
nobles, and to country gentlemen ; by those who
were supposed to understand trade, to those who
were conscious to themselves that they knew no
thing about the matter. That foreign trade en
riched the country, experience demonstrated to
the nobles and country gentlemen, as well as to
the merchants; but how, or in what manner,
none of them well knew. The merchants knew
perfectly in what manner it enriched themselves.
It was their business to know it. But to know
in what manner it enriched the country, was no
part of their business. The subject never came
into their consideration, but when they had occa
sion to apply to their country for some change in
the laws relating to foreign trade. It then be-

CHAP. I. THE WEALTH OF NATIONS.

came necessary to say something about the bene
ficial effects of foreign trade, and the manner in
which those effects were obstructed by the laws
as they then stood. To the judges who were to
decide the business, it appeared a most satisfac
tory account of the matter, when they were told
that foreign trade brought money into the coun
try, but that the laws in question hindered it
from bringing so much as it otherwise would do.
Those arguments therefore produced the wished-
for effect. The prohibition of exporting gold
and silver was in France and England confined
to the coin of those respective countries. The
exportation of foreign coin and of bullion was
made free. In Holland, and in some other
places, this liberty was extended even to the coin
of the country. The attention of government
was turned away from guarding against the ex
portation of gold and silver, to watch over the
balance of trade, as the only cause which could
occasion any augmentation or diminution of
those metals. From one fruitless care it was
turned away to another care much more intri
cate, much more embarrassing, and just equally
fruitless. The title of Mun's book, England's
Treasure in Foreign Trade, became a funda
mental maxim in the political ceconomy, not of
England only, but of all other commercial coun
tries. The inland or home trade, the most im
portant of all, the trade in which an equal capital
affords the greatest revenue, and creates the
greatest employment to the people of the coun
try, was considered as subsidiary only to foreign

148 THE NATURE AND CAUSES OF BOOK iv.

•trade. It neither brought money into the
country, it was said, nor carried any out of it.
The country therefore could never become
either richer or poorer by means of it, except
so far as its prosperity or decay might indirectly
influence the state of foreign trade.

A country that has no mines of its own must
undoubtedly draw its gold and silver from fo
reign countries, in the same manner as one that
has no vineyards of its own must draw its wines.
It does not seem necessary, however, that the
attention of government should be more turned
towards the one than towards the other object.
A country that has wherewithal to buy wine,
will always get the wine which it has occasion
for; and a country that has wherewithal to buy
gold and silver, will never be in want of those
metals. They are to be bought for a certain
price like all other commodities, and as they are
the price of all other commodities, so all other
commodities are the price of those metals. We
trust with perfect security that the freedom of
trade, without any attention of government, will
always supply us with the wine which we have
occasion for: and we may trust with equal se
curity that it will always supply us with all the
gold and silver which we can afford to purchase
or to employ, either in circulating our commo
dities, or in other uses.

The quantity of every commodity which hu
man industry can either purchase or produce,
naturally regulates itself in every country ac
cording to the effectual demand, or according to

CHAP. I. THE WEALTH OF NATIONS. 149

the demand of those who are willing to pay the
whole rent, labour and profits which must be paid
in order to prepare and bring it to market But no
commodities regulate themselves more easily or
more exactly according to this effectual demand
than gold and silver; because, on account of the
small bulk and great value of those metals, no
commodities can be more easily transported from
one place to another; from the places where they
are cheap, to those where they are dear; from the
places where they exceed, to those where they
fall short of this effectual demand. If there were
in England, for example, an effectual demand
for an additional quantity of gold, a packet-boat
could bring from Lisbon, or from wherever else
it was to be had, fifty tons of gold, which could
be coined into more than five millions of guineas!
But if there were an effectual demand for grain
to the same value, to import it would require, at
five guineas a ton, a million of tons of shipping,,
or a thousand ships of a thousand tons each.
The navy of England would not be sufficient.

When the quantity of gold and silver imported
into any country exceeds the effectual demand,
no vigilance of government can prevent their ex
portation. All the sanguinary laws of Spain and
Portugal are not able to keep their gold and sil
ver at home. The continual importations from
Peru and Brazil exceed the effectual demand of
those countries, and sink the price of those me
tals there below that in the neighbouring coun
tries. If, on the contrary, in any particular
country their quantity fell short of the effectual

150 THE NATURE AND CAUSES OF BOOK IV.

demand, so as to raise their price above that of
the neighbouring countries, the government
would have no occasion to take any pains to im
port them. If it were even to take pains to pre
vent their importation, it would not be able to
effectuate it. Those metals, when the Spartans
had got wherewithal to purchase them, broke
through all the barriers which the laws of Ly-
curgus opposed to their entrance into Lacede-
mon. All the sanguinary laws of the customs
are not able to prevent the importation of the
teas of the Dutch and Gottenburgh East India
companies ; because somewhat cheaper than
those of the British company. A pound of tea,
however, is about an hundred times the bulk of
one of the highest prices, sixteen shillings, that
is commonly paid for it in silver, and more than
two thousand times the bulk of the same price
in gold, and consequently just so many times
more difficult to smuggle.

It is partly owing to the easy transportation
of gold and silver from the places where they
abound to those where they are wanted, that
the price of those metals does not fluctuate con
tinually like that of the greater part of other
commodities, which are hindered by their bulk
from shifting their situation, when the market
happens to be either over or under-stocked with
them. The price of those metals, indeed, is not
altogether exempted from variation, but the
changes to which it is liable are generally slow,
gradual, and uniform. In Europe, for example,
it is supposed, without much foundation, per-

CHAP. I. THE WEALTH OF NATIONS. 151

haps, that, during the course of the present and
preceding century, they have been constantly,
but gradually, sinking in their value, on account
of the continual importations from the Spanish
West Indies. But to make any sudden change
in the price of gold and silver, so as to raise or
lower at once, sensibly and remarkably, the
money price of all other commodities, requires
such a revolution in commerce as that occa
sioned by the discovery of America.

If, notwithstanding all this, gold and silver
should at any time fall short in a country which
has wherewithal to purchase them, there are
more expedients for supplying their place, than
that of almost any other commodity. If the
materials of manufacture are wanted, industry
must stop. If provisions are wanted, the people
must starve. But if money is wanted, barter
will supply its place, though with a good deal of
inconveniency. Buying and selling upon credit,
and the different dealers compensating their
credits with one another, once a month or once
a year, will supply it with less inconveniency.
A well-regulated paper money will supply it,
not only without any inconveniency, but, in
some cases, with some advantages. Upon every
account, therefore, the attention of government
never was so unnecessarily employed, as when
directed to watch over the preservation or in
crease of the quantity of money in any country.

No complaint, however, is more common than
that of a scarcity of money. Money, like wine,
must always be scarce with those who have

152 THE NATU11E AND CAUSES OF BOOK IV.

neither wherewithal to buy it, nor credit to bor
row it. Those who have either, will seldom be in
want either of the money, or of the wine which
they have occasion for. This complaint, how
ever, of the scarcity of money, is not always con
fined to improvident spendthrifts. It is some
times general through a whole mercantile town,
and the country in its neighbourhood. Over
trading is the common cause of it. Sober men,
whose projects have been disproportioned to
their capitals, are as likely to have neither where
withal to buy money, nor credit to borrow it, as
prodigals whose expense has been dispropor
tioned to their revenue. Before their projects
can be brought to bear, their stock is gone, and
their credit with it. They run about every
where to borrow money, and every body tells
them that they have none to lend. Even such
general complaints of the scarcity of money do
not always prove that the usual number of gold
and silver pieces are not circulating in the coun
try, but that many people want those pieces
who have nothing to give for them. When the
profits of trade happen to be greater than ordi
nary, over-trading becomes a general error both
among great and small dealers. They do not
always send more money abroad than usual, but
they buy upon credit, both at home and abroad,
an unusual quantity of goods, which they send
to some distant market, in hopes that the returns
will come in before the demand for payment.
The demand comes before the returns, and they
have nothing at hand, with which they can either

CHAP. I. THE WEALTH OF NATIONS. 153

purchase money, or give solid security for bor
rowing. It is not any scarcity of gold and sil
ver, but the difficulty which such people find in
borrowing, and which their creditors find in
getting payment, that occasions the general
complaint of the scarcity of money.

It would be too ridiculous to go about seri
ously to prove, that wealth does not consist in
money, or in gold and silver; but in what money
purchases, and is valuable only for purchasing.
Money, no doubt, makes always a part of the
national capital ; but it has already been shown
that it generally makes but a small part, and al
ways the most unprofitable part of it.

It is not because wealth consists more essen
tially in money than in goods, that the merchant
finds it generally more easy to buy goods with
money, than to buy money with goods ; but
because money is the known and established in
strument of commerce, for which every thing is
readily given in exchange, but which is not al
ways with equal readiness to be got in exchange
for every thing. The greater part of goods be
sides are more perishable than money, and he
may frequently sustain a much greater loss by
keeping them. When his goods are upon hand
too, he is more liable to such demands for money
as he may not be able to answer, than when he
has got their price in his coffers. Over and above
all this, his profit arises more directly from sell
ing than from buying, and he is upon all these
accounts generally much more anxious to ex
change his goods for money, than his money for

THE NATURE AND CAUSES OF BOOK IV.

goods. But though a particular merchant, with
abundance of goods in his warehouse, may some
times be ruined by not being able to sell them
in time, a nation or country is not liable to the
same accident. The whole capital of a mer
chant frequently consists in perishable goods de
stined for purchasing money. But it is but a
very small part of the annual produce of the land
and labour of a country which can ever be de
stined for purchasing gold and silver from their
neighbours. The far greater part is circulated
and consumed among themselves; and even of
the surplus which is sent abroad, the greater part
is generally destined for the purchase of other
foreign goods. Though gold and silver, there
fore, could not be had in exchange for the goods
destined to purchase them, the nation would not
be ruined. It might, indeed, suffer some loss and
inconveniency, and be forced upon some of those
expedients which are necessary for supplying the
place of money. The annual produce of its land
and labour, however, would be the same, or
very nearly the same, as usual, because the same,
or very nearly the same, consumable capital would
be employed in maintaining it. And though
goods do not always draw money so readily as
money draws goods, in they long run the draw
it more necessarily than even it draws them.
Goods can serve many other purposes besides
purchasing money, but money can serve no
other purpose besides purchasing goods. Money,
therefore, necessarily runs after goods, but goods
do not always or necessarily run after money.

CHAP. I. THE WEALTH OF NATIONS. 155

The man who buys, does not always mean to sell
again, but frequently to use or to consume ;
whereas he who sells, always means to buy again.
The one may frequently have done the whole,
but the other can never have done more than
the one-half of his business. It is not for its
own sake that men desire money, but for the
sake of what they can purchase with it.

Consumable commodities, it is said, are soon
destroyed ; whereas gold and silver are of a more
durable nature, and, were it not for this con
tinual exportation, might be accumulated for
ages together, to the incredible augmentation of
the real wealth of the country. Nothing, there
fore, it is pretended, can be more disadvan
tageous to any country, than the trade which
consists in the exchange of such lasting for such
perishable commodities. We do not, however,
reckon that trade disadvantageous which con
sists in the exchange of the hardware of England
for the wines of France ; and yet hardware is a
very durable commodity, and were it not for this
continual exportation, might too be accumulated
for ages together, to the incredible augmenta
tion of the pots and pans of the country. But
it readily occurs that the number of such utensils
is in every country necessarily limited by the use
which there is for them ; that it would be absurd
to have more pots and pans than were necessary
for cooking the victuals usually consumed there :
and that, if the quantity of victuals were to in
crease, the number of pots and pans would
readily increase along with it, a part of the in-

156 THE NATURE AND CAUSES OF BOOK IV.

creased quantity of victuals being employed in
purchasing them, or in maintaining an addi
tional number of workmen whose business it was
to make them. It should as readily occur that the
quantity of gold and silver is in every country
limited by the use which there is for those metals ;
that their use consists in circulating commodities
as coin, and in affording a species of household
furniture as plate; that the quantity of coin in
every country is regulated by the value of the
commodities which are to be circulated by it : in
crease that value, and immediately a part of it
will be sent abroad to purchase, wherever it is to
be had, the additional quantity of coin requisite
for circulating them : that the quantity of plate is
regulated by the number and wealth of those pri
vate families who choose to indulge themselves in
that sort of magnificence : increase the number
and wealth of such families, and a part of this
increased wealth will most probably be employed
in purchasing, wherever it is to be found, an ad
ditional quantity of plate: that to attempt to in
crease the wealth of any country, either by in
troducing or by detaining in it an unnecessary
quantity of gold and silver, is as absurd as it
would be to attempt to increase the good cheer
of private families, by obliging them to keep an
unnecessary number of kitchen utensils. As the
expense of purchasing those unnecessary utensils
would diminish instead of increasing either the
quantity or the goodness of the family provi
sions; so the expense of purchasing an unneces
sary quantity of gold and silver must, in every

CHAP. I.. THE WEALTH OF NATIONS. 157

country, as necessarily diminish the wealth
which feeds, clothes, and lodges, which main*
tains and employs the people. Gold and sil
ver, whether in the shape of coin or of plate,
are utensils, it must be remembered, as much
as the furniture of the kitchen. Increase the
use for them, increase the consumable com
modities which are to be circulated, managed
and prepared by means of them, and you will
infallibly increase the quantity ; but if you at
tempt, by extraordinary means, to increase the
quantity, you will as infallibly diminish the use
and even the quantity too, which in those metals
can never be greater than what the use requires.
Were they ever to be accumulated beyond this
quantity, their transportation is so easy, and the
loss which attends their lying idle and unem
ployed so great, that no law could prevent their
being immediately sent out of the country.

It is not always necessary to accumulate gold
and silver, in order to enable a country to carry
on foreign wars, and to maintain fleets and
armies in distant countries. Fleets and armies
are maintained, not with gold and silver, but
with consumable goods. The nation which,
from the annual produce of its domestic indus
try, from the annual revenue arising out of its
lands, and labour, and consumable stock, has
wherewithal to purchase those consumable goods
in distant countries, can maintain foreign wars
there.

A nation may purchase the pay and provisions
of an army in a distant country three different
ways ; by sending abroad either, first, some part

158 THE NATURE AND CAUSES OF BOOK IV.

of its accumulated gold and silver ; or secondly,
some part of the annual produce of its manu
factures ; or last of all, some part of its annual
rude produce.

The gold and silver which can properly be
considered as accumulated or stored up in any
country, may be distinguished into three parts ;
first, the circulating money ; secondly, the plate
of private families ; and last of all, the money
which may have been collected by many years
parsimony, and laid up in the treasury of the
prince.

It can seldom happen that much can be spared
from the circulating money of the country ; be
cause in that there can seldom be much redun
dancy. The value of goods annually bought
and sold in any country requires a certain quan
tity of money to circulate and distribute them
to their proper consumers, and can give employ
ment to no more. The channel of circulation
necessarily draws to itself a sum sufficient to fill
it, and never admits any more. Something,
however, is generally withdrawn from this chan
nel in the case of foreign war. By the great
number of people who are maintained abroad,
fewer are maintained at home. Fewer goods are
circulated there, and less money becomes neces
sary to circulate them. An extraordinary quan
tity of paper money, of some sort or other too,
such as exchequer notes, navy bills, and bank
bills in England, is generally issued upon such
occasions, and by supplying the place of circu
lating gold and silver, gives an opportunity of
sending a greater quantity of it abroad. All

CHAP. I. THE WEALTH OF NATIONS. 159

this, however, could afford but a poor resource
for maintaining a foreign war, of great expense
and several years duration.

The melting down of the plate of private fa
milies, has upon every occasion been found a still
more insignificant one. The French, in the be
ginning of the last war, did not derive so much
advantage from this expedient as to compensate
the loss of the fashion.

The accumulated treasures of the prince have, I
in former times, afforded a much greater and
more lasting resource. In the present times, if
you except the king of Prussia, to accumulate
treasure seems to be no part of the policy of Eu
ropean princes.

The funds which maintained the foreign wars
of the present century, the most expensive, per
haps, which history records, seem to have had
little dependency upon the exportation either of
the circulating money, or of the plate of private
families, or of the treasure of the prince. The
last French war cost Great Britain upwards of
ninety millions, including not only the seventy-
five millions of new debt that was contracted,
but the additional two shillings in the pound
land-tax, and what was annually borrowed of the
sinking fund. More than two-thirds of this ex
pense were laid out in distant countries ; in Ger
many, Portugal, America, in the ports of the
Mediterranean, in the East and West Indies.
The kings of England had no accumulated trea
sure. We never heard of any extraordinary
quantity of plate being melted down. The cir-

160 THE NATURE AND CAUSES OF BOOK IV.

dilating gold and silver of the country had not
been supposed toexceed eighteen millions. Since
the late recoinage of the gold, however, it is
believed to have been a good deal under rated.
Let us suppose, therefore, according to the most
exaggerated computation which I remember to
have either seen or heard of, that, gold and silver
together, it amounted to thirty millions. Had
the war been carried on by means of our money,
the whole of it must, even according to this com
putation, have been sent out and returned again
at least twice, in a period of between six and
seven years. Should this be supposed, it would
afford the most decisive argument to demonstrate
how unnecessary it is for government to watch
over the preservation of money, since upon this
supposition the whole money of the country must
have gone from it and returned to it again, two
different times in so short a period, without any
body's knowing any thing of the matter. The
channel of circulation, however, never appeared
more empty than usual during any part of this
period. Few people wanted money who had
wherewithal to pay for it. The profits of foreign
trade, indeed, were greater than usual during
the whole war; but especially towards the end
of it. This occasioned, what it always occasions,
a general over-trading in all the ports of Great
Britain; and this again occasioned the usual
complaint of the scarcity of money, which always
follows over-trading. Many people wanted it,
who had neither wherewithal to buy it, nor
credit to borrow it; and because the debtors

CHAP. I. THE WEALTH OF NATIONS. 161

found it difficult to borrow, the creditors found
it difficult to get payment. Gold and silver,
however, were generally to be had for their
value, by those who had that value to give for
them.

The enormous expense of the late war, there
fore, must have been chiefly defrayed, not by
the exportation of gold and silver, but by that
of British commodities of some kind or other.
When the government, or those who acted under
them, contracted with a merchant for a remit
tance to some foreign country, he would natu
rally endeavour to pay his foreign correspondent,
upon whom he had granted a bill, by sending
abroad rather commodities than gold and silver.
If the commodities of Great Britain were not in
demand in that country, he would endeavour to
send them to some other country, in 'which he
could purchase a bill upon that country. The
transportation of commodities, when properly
suited to the market, is always attended with a
considerable profit ; whereas that of gold and
silver is scarce ever attended with any. When
those metals are sent abroad in order to pur
chase foreign commodities, the merchants' profit
arises, not from the purchase, but from the sale
of the returns. But when they are sent abroad
merely to pay a debt, he gets no returns, and
consequently no profit. He naturally, there
fore, exerts his invention to find out a way of
paying his foreign debts, rather by the exporta
tion of commodities than by that of gold and
silver. The great quantity of British goods,

VOL. II. M

, .
THE NATURE AND CAUSES OF BOOK IV.

exported during the course of the late war,
without bringing back any returns, is accord
ingly remarked by the author of The Present
State of the Nation.

Besides the three sorts of gold and silver above
mentioned, there is in all great commercial
countries a good deal of bullion alternately im
ported and exported for the purposes of foreign
trade. This bullion, as it circulates among
different commercial countries in the same man
ner as the national coin circulates in every par
ticular country, may be considered as the money
of the great mercantile republic. The national
coin receives its movement and direction from
the commodities circulated within the precincts
of each particular country : the money of the
mercantile republic, from those circulated be
tween different countries. Both are employed
in facilitating exchanges, the one between dif
ferent individuals of the same, the other between
those of different nations. Part of this money
of the great mercantile republic may have been,
and probably was, employed in carrying on the
late war. In time of a general war, it is natural
to suppose that a movement and direction should
be impressed upon it, different from what it
usually follows in profound peace ; that it should
circulate more about the seat of the war, and be
more employed in purchasing there, and in the
neighbouring countries, the pay and provisions
of the different armies. But whatever part of
this money of the mercantile republic Great
Britain may have annually employed in this

CHAP. I. THE WEALTH OF NATIONS. 163

manner, it must have been annually purchased,
either with British commodities, or with some
thing else that had been purchased with them ;
which still bring us back to commodities, to the
annual produce of the land and labour of the
country, as the ultimate resources which enabled
us to carry on the war. It is natural indeed to
suppose, that so great an annual expense must
have been defrayed from a great annual produce.
The expense of 1761, for example, amounted to
more than nineteen millions. No accumulation
could have supported so great an annual profu
sion. There is no annual produce even of gold
and silver which could have supported it. The
whole gold and silver annually imported into
both Spain and Portugal, according to the best
accounts, does not commonly much exceed six
millions sterling, which, in some years, would
scarce have paid four months expense of the
late war.

The commodities most proper for being trans
ported to distant countries, in order to purchase
there, either the pay and provisions of an army,
or some part of the money of the mercantile
republic to be employed in purchasing them,
seem to be the finer and more improved manu
factures; such as contain a great value in a small
bulk, and can, therefore, be exported to a great
distance at little expense. A country whose in
dustry produces a great annual surplus of such
manufactures, which are usually exported to
foreign countries, may carry on for many years
a very expensive foreign war, without either ex-

M 2

164 THE NATURE AND CAUSES OF BOOK iv%

porting any considerable quantity of gold and
silver, or even having any such quantity to ex
port. A considerable part of the annual sur
plus of its manufactures must, indeed, in this
case, be exported, without bringing back any re
turns to the country, though it does to the mer
chant ; the government purchasing of the mer
chant his bills upon foreign countries, in order
to purchase there the pay and provisions of an
army. Some part of this surplus, however, may
still continue to bring back a return. The ma
nufacturers, during the war, will have a double
demand upon them, and be called upon, first,
to work up goods to be sent abroad, for paying
the bills drawn upon foreign countries for the
pay and provisions of the army ; and, secondly,
to work up such as are necessary for purchasing
the common returns that had usually been con
sumed in the country. In the midst of the most
destructive foreign war, therefore, the greater
part of manufactures may frequently flourish
greatly ; and, on the contrary, they may decline
on the return of the peace. They may flourish
amidst the ruin of their country, and begin to
decay upon the return of its prosperity. The
different state of many different branches of the
British manufactures during the late war, and
for some time after the peace, may serve as an
illustration of what has been just now said.

No foreign war of great expense or duration
could conveniently be carried on by the exporta
tion of the rude produce of the soil. The ex
pense of sending such a quantity of it to a fo-

CHAP. I. THE WEALTH OF NATIONS. 165

reign country as might purchase the pay and
provisions of an army, would be too great. Few
countries too produce much more rude produce
than what is sufficient for the subsistence of their
own inhabitants. To send abroad any great
quantity of it, therefore, would be to send
abroad a part of the necessary subsistence of the
people. It is otherwise with the exportation of
manufactures. The maintenance of the people
employed in them is kept at home, and only the
surplus part of their work is exported. Mr.
Hume frequently takes notice of the inability of
the ancient kings of England to carry on, with
out interruption, any foreign war of long dura
tion. The English, in those days, had nothing
wherewithal to purchase the pay and provisions
of their armies in foreign countries, but either
the rude produce of the soil, of which no con
siderable part could be spared from the home con
sumption, or a few manufactures of the coarsest
kind, of which, as well as of the rude produce,
the transportation was too expensive. This in
ability did not arise from the want of money, but
of the finer and more improved manufactures.
Buying and selling was transacted by means of
money in England then, as well as now. The
quantity of circulating money must have borne
the same proportion to the number and value of
purchases and sales usually transacted at that
time, which it does to those transacted at present;
or rather it must have borne a greater proportion,
because there was then no paper, which now
occupies a great part of the employment of gold

166 THE NATURE AND CAUSES OF HOOK IV.

and silver. Among nations to whom commerce
and manufactures are little known, the sove
reign, upon extraordinary occasions, can seldom
draw any considerable aid from his subjects, for
reasons which shall be explained hereafter. It
is in such countries, therefore, that he generally
endeavours to accumulate a treasure as the only
resource against such emergencies. Independ
ent of this necessity, he is in such a situation
naturally disposed to the parsimony requisite for
accumulation. In that simple state, the expense
even of a sovereign is not directed by the vanity
which delights in the gaudy finery of a court,
but is employed in bounty to his tenants, and
hospitality to his retainers. But bounty and
hospitality very seldom lead to extravagance;
though vanity almost always does. Every Tartar
chief, accordingly, has a treasure. The treasures
of Mazepa, chief of the Cossacks in the Ukraine,
the famous ally of Charles the Xllth, are said to
have been very great. The French kings of the
Merovingian race had all treasures. When they
divided their kingdom among their different
children, they divided their treasure too. The
Saxon princes, and the first kings after the con
quest, seem likewise *to have accumulated trea
sures. The first exploit of every new reign was
commonly to seize the treasure of the preceding
king, as the most essential measure for securing
the succession. The sovereigns of improved and
commercial countries are not under the same
necessity of accumulating treasures, because
they can generally draw from their subjects ex-

CHAP. I. THE WEALTH OF NATIONS. 167

traordinary aids upon extraordinary occasions.
They are likewise less disposed to do so. They
naturally, perhaps necessarily, follow the mode
of the times, and their expense comes to be re
gulated by the same extravagant vanity which
directs that of all the other great proprietors in
their dominions. The insignificant pageantry of
their court becomes every day more brilliant,
and the expense of it not only prevents accumu
lation, but frequently encroaches upon the funds
destined for more necessary expenses. What
Dercyllidas said of the court of Persia, may be
applied to that of several European princes, that
he saw there much splendour but little strength*
and many servants but few soldiers.

The importation of gold and silver is not the
principal, much less the sole benefit which a
nation derives from its foreign trade. Between
whatever places foreign trade is carried on, they
all of them derive two distinct benefits from it.
It carries out that surplus part of the produce of
their land and labour for which there is no de
mand among them, and brings back in return
for it something else for which there is a demand.
It gives a value to their superfluities, by ex-""]
changing them for something else, which may '
satisfy a part of their wants, and increase their
enjoyments. By means of it, the narrowness of
the home market does not hinder the division of
labour in any particular branch of art or manu
facture from being carried to the highest per
fection. By opening a more extensive market
for whatever part of the produce of their labour

168 THE NATURE AND CAUSES OF BOOK iv.

may exceed the home consumption, it en
courages them to improve its productive powers,
and to augment its annual produce to the ut
most, and thereby to increase the real revenue
and wealth of the society. These great and im
portant services foreign trade is continually oc
cupied in performing, to all the different coun
tries between which it is carried on. They all de
rive great benefit from it, though that in which
the merchant resides generally derives the
greatest, as he is generally more employed in
supplying the wants, and carrying out the su
perfluities of his own, than of any other parti
cular country. To import the gold and silver
which may be wanted, into the countries which
have no mines, is, no doubt, a part of the busi
ness of foreign commerce. It is, however, a most
insignificant part of it. A country which carried
on foreign trade merely upon this account, could
scarce have occasion to freight a ship in a century.
It is not by the importation of gold and silver,
that the discovery of America has enriched Eu
rope. By the abundance of the American
mines, those metals have become cheaper. A
service of plate can now be purchased for about
a third part of the corn, or a third part of the
labour, which it would have cost in the fifteenth
century. With the same annual expense of la
bour and commodities, Europe can annually
purchase about three times the quantity of plate
which it could have purchased at that time.
But when a commodity comes to be sold for a
third part of what had been its usual price, not

CHAP. I. THE WEALTH OF NATIONS. 169

only those who purchased it before can purchase
three times their former quantity, but it is
brought down to the level of a much greater
number of purchasers, perhaps no more than
ten, perhaps no more than twenty times the for
mer number. So that there may be in Europe
at present not only more than three times, but
more than twenty or thirty times the quantity of
plate which would have been in it, even in its
present state of improvement, had the discovery
of the American mines never been made. So far
Europe has, no doubt, gained a real conveni-
ency, though surely a very trifling one. The
cheapness of gold and silver renders those metals
rather less fit for the purposes of money than
they were before. In order to make the same
purchases, we must load ourselves with a greater
quantity of them, and carry about a shilling in
our pocket where a groat would have done
before. It is difficult to say which is most
trifling, this inconveniency, or the opposite con-
veniency. Neither the one nor the other could
have made any very essential change in the state
of Europe. The discovery of America, however,
certainly made a most essential one. By open
ing a new and inexhaustible market to all the
commodities of Europe, it gave occasion to new
divisions of labour and improvements of art,
which, in the narrow circle of the ancient com
merce, could never have taken place for want of
a market to take off the greater part of their
produce. The productive powers of labour were
improved, and its produce increased in all the

170 THE NATURE AND CAUSES OF BOOK IV.

different countries of Europe, and together with
it the real revenue and wealth of the inhabitants.
The commodities of Europe were almost all newr
to America, and many of those of America were
new to Europe. A new set of exchanges, there
fore, began to take place which had never been
thought of before, and which should naturally
have proved as advantageous to the new, as it
certainly did to the old continent. The savage
injustice of the Europeans rendered an event,
which ought to have been beneficial to all, ruin
ous and destructive to several of those unfor
tunate countries.

The discovery of a passage to the East Indies,
by the Cape of Good Hope, which happened
much about the same time, opened, perhaps, a
still more extensive range to foreign commerce
than even that of America, notwithstanding the
greater distance. There were but two nations
in America, in any respect superior to savages,
and these were destroyed almost as soon as dis
covered. The rest were mere savages. But the
empires of China, Indostan, Japan, as well as
several others in the East Indies, without having
richer mines of gold or silver, were in every
other respect much richer, better cultivated, and
more advanced in all arts and manufactures than
either Mexico or Peru, even though we should
credit, what plainly deserves no credit, the ex
aggerated accounts of the Spanish writers, con-
cerning the ancient state of those empires. But
rich and civilized nations can always exchange
to a much greater value with one another, than

CHAP. I. THE WEALTH OF NATIONS. 171

with savages and barbarians. Europe, however,
has hitherto derived much less advantage from
its commerce with the East Indies, than from
that with America. The Portuguese monopo
lized the East India trade to themselves for
about a century, and it was only indirectly and
through them, that the other nations of Europe
could either send out or receive any goods from
that country. When the Dutch, in the begin
ning of the last century, began to encroach upon
them, they vested their whole East India com
merce in an exclusive company. The English,
French, Swedes, and Danes, have all followed
their example, so that no great nation in Europe
has ever yet had the benefit of a free commerce
to the East Indies. No other reason need be
assigned why it has never been so advantageous
as the trade to America, which, between almost
every nation of Europe and its own colonies, is
free to all its subjects. The exclusive privileges
of those East India companies, their great riches,
the great favour and protection which these have
procured them from their respective govern
ments, have excited much envy against them.
This envy has frequently represented their trade
as altogether pernicious, on account of the great
quantities of silver, which it every year exports
from the countries from which it is carried on.
The parties concerned have replied,, that their
trade, by this continual exportation of silver,
might, indeed, tend to impoverish Europe in
general, but not the particular country from
which it was carried on; because, by the ex-

172 THE NATURE AND CAUSES OF BOOK IV.

portation of apart of the returns to other Euro
pean countries, it annually brought home a much
greater quantity of that metal than it carried
out. Both the objection and the reply are
founded in the popular notion which I have been
just now examining. It is, therefore, unneces
sary to say anything further about either. By the
annual exportation of silver to the East Indies,
plate is probably somewhat dearer in Europe
than it otherwise might have been ; and coined
silver probably purchases a larger quantity both
of labour and commodities. The former of these
two effects is a very small loss, the latter a very
small advantage ; both too insignificant to de
serve any part of the public attention. The
trade to the East Indies, by opening a market
to the commodities of Europe, or, what comes
nearly to the same thing, to the gold and silver
which is purchased with those commodities,
must necessarily tend to increase the annual
production of European commodities, and con
sequently the real wealth and revenue of Europe.
That it has hitherto increased them so little, is
probably owing to the restraints which it every
where labour sounder.

I thought it necessary, though at the hazard
of being tedious, to examine at full length this
popular notion that wealth consists in money,
or in gold and silver. Money in common lan
guage, as I have already observed, frequently
signifies wealth ; and this ambiguity of expression
has rendered this popular notion so familar to
us, that even they, who are convinced of its ab-

CHAP. I. THE WEALTH OF NATIONS.

surdity, are very apt to forget their own prin
ciples, and in the course of their reasonings to
take it for granted as a certain and undeniable
truth. Some of the best English writers upon
commerce set out with observing, that the wealth
of a country consists, not in its gold and silver
only, but in its lands, houses, and consumable
goods of all different kinds. In the course of
their reasonings, however, the lands, houses,
and consumable goods seem to slip out of their
memory, and the strain of their argument fre
quently supposes that all wealth consists in gold
and silver, and that to multiply those metals is
the great object of national industry and com
merce.

The two principles being established, how
ever, that wealth consisted in gold and silver,
and that those metals could be brought into a
country which had no mines only by the balance
of trade, or by exporting to a greater value than
it imported ; it necessarily became the great ob
ject of political ceconomy to diminish as much
as possible the importation of foreign goods for
home consumption, and to increase as much as
possible the exportation of the produce of do
mestic industry. Its two great engines for
enriching the country, therefore, were restraints
upon importation, and encouragements to ex
portation.

The restraints upon importation were of two
kinds.

First, Restraints upon the importation of

174 THE NATUHE AND CAUSES OF BOOK iv,

such foreign goods for home consumption as
could be produced at home, from whatever coun
try they were imported.

Secondly, Restraints upon the importation of
goods of almost all kinds from those particular
countries with which the balance of trade was
supposed to be disadvantageous.

Those different restraints consisted sometimes
in high duties, and sometimes in absolute pro
hibitions.

Exportation was encouraged sometimes by
drawbacks, sometimes by bounties, sometimes
by advantageous treaties of commerce with fo
reign states, and sometimes by the establishment
of colonies in distant countries.

Drawbacks were given upon two different
occasions. When the home manufactures were
subject to any duty or excise, either the whole
or a part of it was frequently drawn back upon
their exportation ; and when foreign goods liable
to a duty were imported in order to be exported
again, either the whole or apart of this duty was
sometimes given back upon such exportation.

Bounties were given for the encouragement
either of some beginning manufactures, or of
such sorts of industry of other kinds as were
supposed to deserve particular favour.

By advantageous treaties of commerce, par
ticular privileges were procured in some foreign
state for the goods and merchants of the country,
beyond what were granted to those of other
countries.

CHAP. I. THE WEALTH OF NATIONS. 175

By the establishment of colonies in distant
countries, not only particular privileges, but a
monopoly, was frequently procured for the goods
and merchants of the country /which established
them.

The two sorts of restraints upon importation
above mentioned, together with these four en
couragements to exportation, constitute the six
principal means by which the commercial system
proposes to increase the quantity of gold and
silver in any country by turning the balance of
trade in its favour. I shall consider each of
them in a particular chapter, and without taking
much further notice of their supposed tendency
to bring money into the country, I shall examine
chiefly what are likely to be the effects of each
of them upon the annual produce of its industry.
According as they tend either to increase or di-.
minish the value of this annual produce, they
must evidently tend either to increase or dimi
nish the real wealth and revenue of the country.

176 THE NATURE AND CAUSES OF BOOK iv.

CHAPTER It

»

Of Restraints upon the Importation from foreign
Countries of such Goods as can be produced
at Home.

BY restraining, either by high duties, or by
absolute prohibitions, the importation of such
goods from foreign countries as can be pro
duced at home, the monopoly of the home
market is more or less secured to the domestic
industry employed in producing them. Thus
the prohibition of importing either live cattle or
salt provisions from foreign countries secures to
the graziers of Great Britain the monopoly of
the home market for butchers'-meat. The high
duties upon the importation of corn, which in
times of moderate plenty amount to a prohibi
tion, give a like advantage to the growers of that
commodity. The prohibition of the importa
tion of foreign woollens is equally favourable to
the woollen manufactures. The silk manufac
ture, though altogether employed upon foreign
materials, has lately obtained the same advan
tage. The linen manufacture has not yet obtained
it, but is making great strides towards it. Many
other sorts of manufactures have, in the same
manner, obtained in Great Britain, either alto
gether, or very nearly, a monopoly against their
countrymen. The variety of goods of which the
importation into Great Britain is prohibited,

CHAP. II. THE WEALTH OF NATIONS. 177

either absolutely, or under certain circum
stances, greatly exceeds what can easily be sus
pected by those who are not well acquainted
with the laws of the customs. *

That this monopoly of the home market fre
quently gives great encouragement to that par
ticular species of industry which enjoys it, and
frequently turns towards that employment a
greater share of both the labour and stock of the
society than would otherwise have gone to it,
cannot be doubted. But whether it tends either
to increase the general industry of the society,
or to give it the most advantageous direction, is
not, perhaps, altogether so evident.

The general industry of the society never can
exceed what the capital of the society can em
ploy. As the number of workmen that can be
kept in employment by any particular person
must bear a certain proportion to his capital, so
the number of those that can be continually em
ployed by all the members of a great society,
must bear a certain proportion to the whole ca
pital of that society, and never can exceed that
proportion. No regulation of commerce can in
crease the quantity of industry in any society
beyond what its capital can maintain. It can
only divert a part of it into a direction into which
it might not otherwise have gone; and it is by
no means certain that this artificial direction is
likely to be more advantageous to the society
than that into which it would have gone of its
own accord.

Every individual is continually exerting him
self to find out the most advantageous employ-

VOL. II. N

178 THE NATURE AND CAUSES OF BOOK IV.

ment for whatever capital he can command. It
is his own advantage, indeed, and not that of
the society which he has in view. But the study
of his own advantage naturally, or rather neces
sarily, leads him to prefer that employment
which is most advantageous to the society.

First, every individual endeavours to employ
his capital as near home as he can, and conse
quently as much as he can in the support of do
mestic industry; provided always that he can
thereby obtain the ordinary, or not a great deal
less than the ordinary profits of stock.

Thus, upon equal or nearly equal profits,
every wholesale merchant naturally prefers the
home trade to the foreign trade of consumption,
and the foreign trade of consumption to the
carrying trade. In the home trade his capital
is never so long out of his sight as it frequently
is in the foreign trade of consumption. He can
know better the character and situation of the
persons whom he trusts, and if he should hap
pen to be deceived, he knows better the laws of
the country from which he must seek redress.
In the carrying trade, the capital of the mer
chant is, as it were, divided between two foreign
countries, and no part of it is ever necessarily
brought home, or placed under his own imme
diate view and command. The capital which
an Amsterdam merchant employs in carrying
corn from Konnigsberg to Lisbon, and fruit and
wine from Lisbon to Konnigsberg, must ge
nerally be the one half of it at Konnigsberg and
the other half at Lisbon. No part of it need
ever come to Amsterdam. The natural resi-

CHAP. II. THE WEALTH OF NATIONS. 179

dence of such a merchant should either be at
Kormigsberg or Lisbon, and it can only be some
very particular circumstances which can make
him prefer the residence of Amsterdam. The
uneasiness, however, which he feels at being se
parated so far from his capital, generally deter
mines him to bring part both of the Konnigs-
berg goods which he destines for the market of
Lisbon, and of the Lisbon goods which he de
stines for that of Konnigsberg, to Amsterdam :
and though this necessarily subjects him to a
double charge of loading and unloading, as well
as to the payment of some duties and customs,
yet for the sake of having some part of his ca
pital always under his own view and command,
he willingly submits to this extraordinary
charge ; and it is in this manner that every
country which has any considerable share of the
carrying trade, becomes always the emporium,
or general market, for the goods of all the dif
ferent countries whose trade it carries on. The
merchant, in order to save a second loading and
unloading, endeavours always to sell in the home
market as much of the goods of all those differ
ent countries as he can, and thus, so far as he
can, to convert his carrying trade into a foreign
trade of consumption. A merchant, in the
same manner, who is engaged in the foreign
trade of consumption, when he collects goods
for foreign markets, will always be glad upon
equal or nearly equal profits, to sell as great a
part of them at home as he can. He saves him
self the risk and trouble of exportation, when, so
far as he can, he thus converts his foreign trade

N 2

180 THE NATURE AND CAUSES OF BOOK IV.

of consumption into a home trade. Home is in
this manner the centre, if I may say so, round
which the capitals of the inhabitants of every
country are continually circulating, and towards
which they are always tending, though by par
ticular causes they may sometimes be driven off
and repelled from it towards more distant em
ployments. But a capital employed in the home
trade, it has already been shown, necessarily
puts into motion a greater quantity of domestic
industry, and gives revenue and employment to
a greater number of the inhabitants of the coun
try, than an equal capital employed in the fo
reign trade of consumption : and one employed
in the foreign trade of consumption has the same
advantage over an equal capital employed in
the carrying trade. Upon equal, or only nearly
equal profits, therefore, every individual na
turally inclines to employ his capital in the man
ner in which it is likely to afford the greatest
support to domestic industry, and to give re-^
venue and employment to the greatest number
of people of his own country.

Secondly, every individual who employs his
capital in the support of domestic industry, ne
cessarily endeavours so to direct that industry,
that its produce may be of the greatest possible
value.

The produce of industry is what it adds to
the subject or materials upon which it is em
ployed. In proportion as the value of this pro
duce is great or small, so will likewise be the
profits of the employer. But it is only for the
sake of profit that any man employs a capital in

CHAP. II. THE WEALTH OF NATIONS. !S1

the support of industry; and he will always,
therefore, endeavour to employ it in the support
of that industry of which the produce is likely
to be of the greatest value, or to exchange for
the greatest quantity either of money or of other
goods.

But the annual revenue of every society is
always precisely equal to the exchangeable value
of the whole annual produce of its industry, or
rather is precisely the same thing with that ex
changeable value. As every individual, there
fore, endeavours as much as he can both to em
ploy his capital in the support of domestic in
dustry, and so to direct that industry that its
produce may be of the greatest value; every in
dividual necessarily labours to render the annual
revenue of the society as great as he can. He
generally, indeed, neither intends to promote
the public interest, nor knows how much he is
promoting it. By preferring the support of do
mestic to that of foreign industry, he intends
only his own security; and by directing that in
dustry in such a manner as its produce may be
of the greatest value, he intends only his own
gain, and he is in this, as in many other cases,
led by an invisible hand to promote an end which
was no part of his intention. Nor is it always
the worse for the society that it was no part of
it. By pursuing his own interest he frequently
promotes that of the society more effectually
than when he really intends to promote it. I
have never known much good done by those
who affected to trade for the public good. It is

182 THE NATURE AND CAUSES OF BOOK IV-

an affectation, indeed, not very common among
merchants, and very few words need be em
ployed in dissuading them from it.

What is the species of domestic industry
which his capital can employ, and of which the
produce is likely to be of the greatest value,
every individual, it is evident, can, in his local
situation, judge much better than any statesman
or lawgiver can do for him. The statesman,
who should attempt to direct private people in
what manner they ought to employ their capitals,
would not only load himself with a most unne
cessary attention, but assume an authority which
could safely be trusted, not only to no single
person, but to no council or senate whatever,
and which would no-where be so dangerous as in
the hands of a man who had folly and presump
tion enough to fancy himself fit to exercise it.

To give the monopoly of the home market to
the produce of domestic industry, in any parti
cular art or manufacture, is in some measure to
direct private people in what manner they ought
to employ their capitals, and must, in almost all
cases, be either a useless or a hurtful regulation-
If the produce of domestic can be brought there
as cheap as that of foreign industry, the regula
tion is evidently useless. If it can not, it must
generally be hurtful. It is the maxim of every
prudent master of a family, never to attempt to
make at home what it will cost him more to make
than to buy. The tailor does not attempt to
make his own shoes, but buys them of the shoe
maker. The shoemaker does not attempt to

CHAP. II. THE WEALTH OF NATIONS. 183

make his own clothes, but employs a tailor. The
farmer attempts to make neither the one nor the
other, but employs those different artificers. All
of them find it for their interest to employ their
whole industry in a way in which they have
some advantage over their neighbours, arid to
purchase with a part of its produce, or what is
the same thing, with the price of a part of it,
whatever else they have occasion for.

What is prudence in the conduct of every
private family, can scarce be folly in that of a
great kingdom. If a foreign country can supply
us with a commodity cheaper than we ourselves
can make it, better buy it of them with some
part of the produce of our own industry, em
ployed in a way in which we have some advan
tage. The general industry of the country, being
always in proportion to the capital which em
ploys it, will not thereby be diminished, no more
than that of the above-mentioned artificers; but
only left to find out the way in which it can be
employed with the greatest advantage. It is
certainly not employed to the greatest advan
tage, when it is thus directed towards an object
which it can buy cheaper than it can make. The
value of its annual produce is certainly more or
less diminished, when it is thus turned away
from producing commodities evidently of more
value than the commodity which it is directed to
produce. According to the supposition, that
commodity could be purchased from foreign
countries cheaper than it can be made at home.
It could, therefore, have been purchased with a

184 THE NATURE AND CAUSES OF BOOK IV.

part only of the commodities, or, what is the
same thing, with a part only of the price of the
commodities, which the industry employed by
an equal capital would have produced at home,
had it been left to follow its natural course.
The industry of the country, therefore, is thus
turned away from a more to a less advantage
ous employment, and the exchangeable value of
its annual produce, instead of being increased,
according to the intention of the lawgiver, must
necessarily be diminished by every such regula
tion.

By means of such regulations, indeed, a par
ticular manufacture may sometimes be acquired
sooner than it could have been otherwise, and
after a certain time may be made at home as
cheap or cheaper than in the foreign country.
But though the industry of the society may be
thus carried with advantage into a particular
channel sooner than it could have been other
wise, it will by no means follow that the sum
total, either of its industry, or of its revenue,
can ever be augmented by any such regulation.
The industry of the society can augment only in
proportion as its capital augments, and its capital
can augment only in proportion to what can be
gradually saved out of its revenue. But the im
mediate effect of every such regulation is to di
minish its revenue, and what diminishes its re
venue is certainly not very likely to augment its
capital faster than it would have augmented of
its own accord, had both capital and industry
been left to find out their natural employments,

CHAP. II. THE WEALTH OF NATIONS. 185

Though for want of such regulations the so
ciety should never acquire the proposed manu
facture, it would not, upon that account, ne
cessarily be the poorer in any one period of its
duration. In every period of its duration its
whole capital and industry might still have
been employed, though upon different objects,
in the manner that was most advantageous at
the time. In every period its revenue might
have been the greatest which its capital could
afford, and both capital and revenue might have
been augmented with the greatest possible ra
pidity.

The natural advantages which one country has
over another in producing particular commodities
are sometimes so great, that it is acknowledged
by all the world to be in vain to struggle with
them. By means of glasses, hotbeds, and hot-
walls, very good grapes can be raised in Scot
land, and very good wine too can be made of
them at about thirty times the expense for which
at least equally good can be brought from fo
reign countries. Would it be a reasonable law
to prohibit the importation of all foreign wines,
merely to encourage the making of claret and
burgundy in Scotland ? But if there would be
a manifest absurdity in turning towards any em
ployment, thirty times more of the capital and
industry of the country, than would be necessary
to purchase from foreign countries an equal
quantity of the commodities wanted, there must
be an absurdity, though not altogether so glaring,
yet exactly of the same kind, in turning towards

186 THE NATURE AND CAUSES OF BOOK IV.

any such employment a thirtieth, or even a
three hundredth part more of either. Whether
the advantages which one country has over an
other, be natural or acquired, is in this respect
of no consequence. As long as the one coun
try has those advantages, and the other wants
them, it will always be more advantageous for
the latter, rather to buy of the former, than to
make. It is an acquired advantage only, which
one artificer has over his neighbour, who ex
ercises another trade; and yet they both find
it more advantageous to buy of one another,
than to make what does not belong to their par
ticular trades.

Merchants and manufacturers are the people
who derive the greatest advantage from this mo
nopoly of the home market. The prohibition of
the importation of foreign cattle, and of salt pro
visions, together with the high duties upon fo
reign corn, which in times of moderate plenty
amount to a prohibition, are not near so advan
tageous to the graziers and farmers of Great
Britain, as other regulations of the same kind
are to its merchants and manufacturers. Manu
factures, those of the finer kind especially, are
more easily transported from one country to an
other than corn or cattle. It is in the fetching
and carrying manufactures, accordingly, that
foreign trade is chiefly employed. In manu
factures, a very small advantage will enable fo
reigners to undersell our own workmen, even in
the home market. It will require a very great
one to enable them to do so in the rude produce

CHAP. II. THE WEALTH OF NATIONS. 187

of the soil. If the free importation of foreign
manufactures were permitted, several of the
home manufactures would probably suffer, and
some of them, perhaps, go to ruin altogether,
and a considerable part of the stock and in
dustry at present employed in them would be
forced to find out some other employment. But
the freest importation of the rude produce of
the soil could have no such effect upon the
agriculture of the country.

If the importation of foreign cattle, for ex
ample, were made ever so free, so few could be
imported, that the grazing trade of Great Bri
tain could be little affected by it. Live cattle
are, perhaps, the only commodity of which the
transportation is more expensive by sea than by
land. By land they carry themselves to market.
By sea, not only the cattle, but their food and
their water too, must be carried at no small ex
pense and inconveniency. The short sea be
tween Ireland and Great Britain, indeed, renders
the importation of Irish cattle more easy. But
though the free importation of them, which was
lately permitted only for a limited time, were
rendered perpetual, it could have no consider
able effect upon the interest of the graziers of
Great Britain. Those parts of Great Britain
which border upon the Irish sea are all grazing
countries. Irish cattle could never be imported
for their use, but must be drove through those
very extensive countries, at no small expense and
inconveniency, before they could arrive at their
proper market. Fat cattle could not be drove

188 THE NATURE AND CAUSES OF BOOK IV.

so far. Lean cattle, therefore, only could be
imported, and such importation could interfere,
not with the interest of the feeding or fattening
countries, to which, by reducing the price of
lean cattle, it would rather be advantageous,
but with that of the breeding countries only.
The small number of Irish cattle imported since
their importation was permitted, together with
the good price at which lean cattle still continue
to sell, seem to demonstrate that even the breed
ing countries of Great Britain are never likely
to be much affected by the free importation of
Irish cattle. The common people of Ireland,
indeed, are said to have sometimes oppose^ with
violence the exportation of their cattle. But if
the exporters had found any great advantage in
continuing the trade, they could easily, when
the law was on their side, have conquered this
mobbish opposition.

Feeding and fattening countries, besides, must
always be highly improved, whereas breeding
countries are generally uncultivated. The high
price of lean cattle, by augmenting the value of
uncultivated land, is like a bounty against im
provement. To any country which was highly
improved throughout, it would be more advan
tageous to import its lean cattle than to breed
them. The province of Holland, accordingly,
is said to follow this maxim at present. The
mountains of Scotland, Wales, and Northum
berland, indeed, are countries not capable of
much improvement, and seem destined by nature
to be the breeding countries of Great Britain*

CHAP. II. THE WEALTH OF NATIONS. 189

The freest importation of foreign cattle could
have no other effect than to hinder those breed
ing countries from taking advantage of the in
creasing population and improvement of the rest
of the kingdom, from raising their price to an
exorbitant height, and from laying a real tax
upon all the more improved and cultivated parts
of the country.

The freest importation of salt provisions, in
the same manner, could have as little effect upon
the interest of the graziers of Great Britain as
that of live cattle. Salt provisions are not only
a very bulky commodity, but when compared
with fresh meat, they are a commodity both of
worse quality, and, as they cost more labour and
expense, of higher price. They could never,
therefore, come into competition with the fresh
meat, though they might with the salt provisions
of the country. They might be used for victual
ling ships for distant voyages, and such like uses,
but could never make any considerable part of
the food of the people. The small quantity
of salt provisions imported from Ireland since
their importation was rendered free, is an ex
perimental proof that our graziers have nothing
to apprehend from it. It does not appear that
the price of butchers'-meat has ever been sen
sibly affected by it.

Even the free importation of foreign corn
could very little affect the interest of the farmers
of Great Britain. Corn is a much more bulky
commodity than butchers'-meat. A pound of
wheat at a penny is as dear as a pound of but-

190 THE NATURE AND CAUSES OF BOOK IV.

chers'-meat at fourpence. The small quantity
of foreign corn imported even in times of the
greatest scarcity, may satisfy our farmers that
they can have nothing to fear from the freest
importation. The average quantity imported
one year with another, amounts only, according
to the very well informed author of the tracts
upon the corn trade, to twenty-three thousand
seven hundred and twenty-eight quarters of all
sorts of grain, and does not exceed the five hun
dredth and seventy-one part of the annual con
sumption. But as the bounty upon corn occa
sions a great exportation in the years of plenty,
so it must of consequence occasion a greater
importation in the years of scarcity, than in
the actual state of tillage would otherwise take
place. By means of it, the plenty of one year
does not compensate the scarcity of another, and
as the average quantity exported is necessarily
augmented by it, so must likewise, in the actual
state of tillage, the average quantity imported.
If there were no bounty, as less corn would be
exported, so it is probable that, one year with
another, less would be imported than at present.
The corn merchants, the fetchers and carriers of
corn between Great Britain and foreign coun
tries, would have much less employment, and
might suffer considerably ; but the country
gentlemen and farmers could suffer very little.
It is in the corn merchants accordingly, rather
than in the country gentlemen and farmers,
that I have observed the greatest anxiety for
the renewal and continuation of the bounty.

CHAP. II. THE WEALTH OF NATIONS. 191

Country gentlemen and farmers are, to their
great honour, of all people, the least subject to
the wretched spirit of monopoly. The under
taker of a great manufactory is sometimes alarmed
if another work of the same kind is established
within twenty miles of him. The Dutch under
taker of the woollen manufacture at Abbeville
stipulated, that no work of the same kind should
be established within thirty leagues of that city.
Farmers and country gentlemen, on the con
trary, are generally disposed rather to promote
than to obstruct the cultivation and improvement
of their neighbours' farms and estates. They
have no secrets, such as those of the greater part
of manufacturers, but are generally rather fond
of communicating to their neighbours, and of
extending as far as possible any new practice
which they have found to be advantageous.
Pius QuestuSy says old Cato, stabilissimusque,
minimeque invidiosus ; minimeque male cogitantes
sunt, qui in eo studio occupati sunt. Country
gentlemen and farmers, dispersed in different
parts of the country, cannot so easily combine
as merchants and manufacturers, who being
collected into towns, and accustomed to that
exclusive corporation spirit which prevails in
them, naturally endeavour to obtain, against all
their countrymen, the same exclusive privilege
which they generally possess against the inhabit
ants of their respective towns. They accordingly
seem to have been the original inventors of those
restraints upon the importation of foreign goods,
which secure to them the monopoly of the home

192 THE NATURE AND CAUSES OF BOOK IV.

market. It was probably in imitation of them,
and to put themselves upon a level with those
who, they found, were disposed to oppress
them, that the country gentlemen and farmers
of Great Britain so far forgot the generosity
which is natural to their station, as to demand
the exclusive privilege of supplying their coun
trymen with corn and butchers'-meat. They
did not perhaps take time to consider how much
less their interest could be affected by the free
dom of trade than that of the people whose ex
ample they followed.

To prohibit by a perpetual law the importa
tion of foreign corn and cattle, is in reality to
enact, that the population and industry of the
country shall at no time exceed what the rude
produce of its own soil can maintain.

There seem, however, to be two cases in which
it will generally be advantageous to lay some
burden upon foreign, for the encouragement of
domestic industry.

The first is, when some particular sort of in
dustry is necessary for the defence of the coun
try. The defence of Great Britain, for example,
depends very much upon the number of its
sailors and shipping. The act of navigation,
therefore, very properly endeavours to give the
sailors and shipping of Great Britain the mono
poly of the trade of their own country, in some
cases, by absolute prohibitions, and in others
by heavy burdens upon the shipping of foreign
countries. The following are the principal dis
positions of this act.

CHAP. II. THE WEALTH OF NATIONS. 193

First, all ships, of which the owners, ma
sters, and three-fourths of the mariners are not
British subjects, are prohibited, upon pain of
forfeiting ship and cargo, from trading to the
British settlements and plantations, or from
being employed in the coasting trade of Great
Britain.

Secondly, a great variety of the most bulky
articles of importation can be brought into Great
Britain only, either in such ships as are above
described, or in ships of the country where those
goods are produced, and of which the owners,
masters, and three-fourths of the mariners, are
of that particular country ; and when imported
even in ships of this latter kind, they are subject
to double aliens duty. If imported in ships of
any other country, the penalty is forfeiture of
ship and goods. When this act was made, the
Dutch were, what they still are, the great car
riers of Europe, and by this regulation they were
entirely excluded from being the carriers to Great
Britain, or from importing to us the goods of any
other European country.

Thirdly, a great variety of the most bulky
articles of importation are prohibited from being
imported even in British ships, from any coun
try but that in which they are produced ; under
pain of forfeiting ship and cargo. This regu
lation too was probably intended against the
Dutch. Holland was then, as now, the great
emporium for all European goods, and by this
regulation, British ships were hindered from

VOL. n. o

194 THE NATURE AND CAUSES OF BOOK IV.

loading in Holland the goods of any other Euro
pean country.

Fourthly, salt fish of all kinds, whale-fins,
whale-bone, oil, and blubber, not caught by and
cured on board British vessels, when imported
into Great Britain, are subjected to double aliens
duty. The Dutch, as they are still the princi
pal, were then the only fishers in Europe that
attempted to supply foreign nations with fish.
By this regulation, a very heavy burden was laid
upon their supplying Great Britain.

When the act of navigation was made, though
England and Holland were not actually at war,
the most violent animosity subsisted between the
two nations. It had begun during the govern
ment of the long parliament, which first framed
this act, and it broke out soon after in the Dutch
wars during that of the Protector and of Charles
the second. It is not impossible, therefore, that
some of the regulations of this famous act may
have proceeded from national animosity. They
are as wise, however, as if they had all been
dictated by the most deliberate wisdom. Na
tional animosity at that particular time aimed
at the very same object which the most delibe
rate wisdom would have recommended, the di
minution of the naval power of Holland, the
only naval power which could endanger the se
curity of England.

The act of navigation is not favourable to
foreign commerce, or to the growth of that opu
lence which can arise from it. The interest of
a nation in its commercial relations to foreign

CHAP. ii. THE WEALTH OF NATIONS. 195

nations is, like that of a merchant with regard to
the different people with whom he deals, to buy
as cheap and to sell as dear as possible. But it
will be most likely to buy cheap, when by the
most perfect freedom of trade it encourages all
nations to bring to it the goods which it has oc
casion to purchase; and, for the same reason, it
will be most likely to sell dear, when its markets
are thus filled with the greatest number of
buyers. The act of navigation, it is true, lays no
burden upon foreign ships that come to export
the produce of British industry. Even the an
cient aliens duty, which used to be paid upon
all goods exported as well as imported, has, by
several subsequent acts, been taken off from the
greater part of the articles of exportation. But
if foreigners, either by prohibitions or high
duties, are hindered from coming to sell, they
cannot always afford to come to buy; because
coming without a cargo, they must lose the
freight from their own country to Great Britain.
By diminishing the number of sellers, therefore,
we necessarily diminish that of buyers, and are
thus likely not only to buy foreign goods dearer,
but to sell our own cheaper, than if there was a
more perfect freedom of trade. As defence,
however, is of much more importance than opu
lence, the act of navigation is, perhaps, the wisest
of all the commercial regulations of England.

The second case, in which it will generally be
advantageous to lay some burden upon foreign
for the encouragement of domestic industry, is,
when some tax is imposed at home upon the pro-

o 2

196 THE NATURE AND CAUSES OF BOOK IV.

dtice of the latter. In this case, it seems reason
able that an equal tax should be imposed upon
the like produce of the former. This would not
give the monopoly of the home market to do
mestic industry, nor turn towards a particular
employment a greater share of the stock and la
bour of the country, than what would naturally
go to it. It would only hinder any part of what
would naturally go to it from being turned away
by the tax, into a less natural direction, and
would leave the competition between foreign
and domestic industry, after the tax, as nearly as
possible upon the same footing as before it. In
Great Britain, when any such tax is laid upon
the produce of domestic industry, it is usual at
the same time, in order to stop the clamorous
complaints of our merchants and manufacturers,
that they will be undersold at home, to lay a
much heavier duty upon the importation of all
foreign goods of the same kind.

This second limitation of the freedom of trade,
according to some people, should, upon some
occasions, be extended much farther than to the
precise foreign commodities which could come
into competition with those which had been
taxed at home. When the necessaries of life
have been taxed in any country, it becomes
proper, they pretend, to tax not only the like
necessaries of life imported from other countries,
but all sorts of foreign goods which can come
into competition with any thing that is the pro
duce of domestic industry. Subsistence, they
say, becomes necessarily dearer in consequence

CHAP. II. THE WEALTH OF NATIONS. 197

of such taxes; and the price of labour must al
ways rise with the price of the labourer's sub
sistence. Every commodity, therefore, which
is the produce of domestic industry, though not
immediately taxed itself, becomes dearer in con-
sequence of such taxes, because the labour which
produces it becomes so. Such taxes, therefore,
are really equivalent, they say, to a tax upon
every particular commodity produced at home.
In order to put domestic upon the same footing
with foreign industry, therefore, it becomes ne
cessary, they think, to lay some duty upon every
foreign commodity, equal to this enhancement
of the price of the home commodities with which
it can come into competition.

Whether taxes upon the necessaries of life,
such as those in Great Britain upon soap, salt,
leather, candles, &c. necessarily raise the price
of labour, and consequently that of all other
commodities, I shall consider hereafter, when I
come to treat of taxes. Supposing, however,
in the mean time, that they have this effect, and
they have it undoubtedly, this general enhance
ment of the price of all commodities, in conse
quence of that of labour, is a case which differs
in the two following respects from that of a par
ticular commodity, of which the price was en
hanced by a particular tax immediately imposed
upon it.

First, It might always be known with great
exactness how far the price of such a commodity
could be enhanced by such a tax: but how far
the general enhancement of the price of labour

i98 THE NATURE AM) CAUSES OF BOOK IV.

might affect that of every different commodity
about which labour was employed, could never
be known with any tolerable exactness. It would
be impossible, therefore, to proportion with any
tolerable exactness the tax upon every foreign,
to this enhancement of the price of every home,
commodity.

Secondly, Taxes upon the necessaries of life
have nearly the same effect upon the circum
stances of the people as a poor soil and a bad
climate. Provisions are thereby rendered dearer
in the same manner as if it required extraordi
nary labour and expense to raise them. As in
the natural scarcity arising from soil and climate,
it would be absurd to direct the people in what
manner they ought to employ their capitals and
industry, so is it likewise in the artificial scarcity
arising from such taxes. To be left to accom
modate, as well as they could, their industry to
their situation, and to find out those employ
ments in which, notwithstanding their unfavour
able circumstances, they might have some ad
vantage either in the home or in the foreign
market, is what in both cases would evidently
be most for their advantage. To lay a new tax
upon them, because they are already overbur
dened with taxes, and because they already pay
too dear for the necessaries of life, to make them
likewise pay too dear for the greater part of
other commodities, is certainly a most absurd
way of making amends.

Such taxes, when they have grown up to a
certain height, are a curse equal to the barren-

CHAP. ll. THE WEALTH OF NATIONS. 199

ness of the earth and the inclemency of the
heavens; and yet it is in the richest and most
industrious countries that they have been most
generally imposed. No other countries could
support so great a disorder. As the strongest
bodies only can live and enjoy health, under an
unwholesome regimen; so the nations only, that
in every sort of industry have the greatest na
tural and acquired advantages, can subsist and
prosper under such- taxes. Holland is the
country in Europe in which they abound most,
and which from peculiar circumstances con
tinues to prosper, not by means of them, as has
been most absurdly supposed, but in spite of them.

As there are two cases in which it will gene
rally be advantageous to lay some burden upon
foreign, for the encouragement of domestic, in
dustry; so there are two others in which it may
sometimes be a matter of deliberation; in the
one, how far it is proper to continue the free
importation of certain foreign goods; and in the
other, how far, or in what manner, it may be
proper to restore that free importation after it
has been for some time interrupted.

The case in which it may sometimes be a
matter of deliberation how far it is proper to
continue the free importation of certain foreign
goods, is, when some foreign nation restrains by
high duties or prohibitions the importation of
some of our manufactures into their country.
Revenge in this case naturally dictates retalia
tion, and that we should impose the like duties
and prohibitions upon the importation of some

200 THE NATURE AND CAUSES OF BOOK IV.

or all of their manufactures into ours. Nations
accordingly seldom fail to retaliate in this man
ner. The French have been particularly for
ward to favour their own manufactures by re
straining the importation of such foreign goods
as could come into competition with them. In
this consisted a great part of the policy of Mr.
Colbert, who, notwithstanding his great abilities,
seems in this case to have been imposed upon by
the sophistry of merchants and manufacturers,
who are always demanding a monopoly against
their countrymen. It is at present the opinion
of the most intelligent men in France, that his
operations of this kind have not been beneficial
to his country. That minister, by the tarif of
166J, imposed very high duties upon a great
number of foreign manufactures. Upon his re
fusing to moderate them in favour of the Dutch,
they in 167! prohibited the importation of the
wines, brandies, and manufactures of France.
The war of 1672 seems to have been in part oc
casioned by this commercial dispute. The peace
of Nimeguen put an end to it in 1678, by mo
derating some of those duties in favour of the
Dutch, who in consequence took off their pro
hibition. It was about the same time that the
French and English began mutually to oppress
each other's industry, by the like duties and
prohibitions, of which the French, however,
seem to have set the first example. The spirit
of hostility which has subsisted between the two
nations ever since, has hitherto hindered them
from being"moderated on either side. In 1697

CHAP. II. THE WEALTH OF NATIONS. 201

the English prohibited the importation of bone-
lace, the manufacture of Flanders. The govern
ment of that country, at that time under the do
minion of Spain, prohibited in return the im
portation of English woollens. In 1700, the
prohibition of importing bonelace into England
was taken off upon condition that the importa
tion of English woollens into Flanders should be
put on the same footing as before.

There may be good policy in retaliations of
this kind, when there is a probability that they
will procure the repeal of the high duties or
prohibitions complained of. The recovery of a
great foreign market will generally more than
compensate the transitory inconveniency of pay
ing dearer during a short time for some sorts of
goods. To judge whether such retaliations are
likely to produce such an effect, does not, per
haps, belong so much to the science of the legis
lator, whose deliberations ought to be governed
by general principles which are always the same,
as to the skill of that insidious and crafty animal,
vulgarly called a statesman or politician, whose
councils are directed by the momentary fluctua
tions of affairs. When there is no probability
that any such repeal can be procured, it seems
a bad method of compensating the injury done
to certain classes of our people, to do another
injury ourselves, not only to those classes, but
to almost all the other classes of them. When
our neighbours prohibit some manufacture of
ours, we generally prohibit, not only the same,
for that alone would seldom affect them consider-

202 THE NATURE AND CAUSES OF BOOK 1V«

ably, but some other manufacture of theirs.
This may no doubt give encouragement to some
particular class of workmen among ourselves,
and by excluding some of their rivals, may
enable them to raise their price in the home-
market. Those workmen, however, who suffered
by our neighbours prohibition, will not be be
nefited by ours. On the contrary, they and al
most all the other classes of our citizens will
thereby be obliged to pay dearer than before for
certain goods. Every such law, therefore, im
poses a real tax upon the whole country, not in
favour of that particular class of workmen who
were injured by our neighbours prohibition, but
of some other class.

The case in which it may sometimes be a
matter of deliberation, how far, or in what man
ner, it is proper to restore the free importation
of foreign goods, after it has been for some time
interrupted, is, when particular manufactures,
by means of high duties or prohibitions upon all
foreign goods which can come into competition
with them, have been so far extended as to em
ploy a great multitude of hands. Humanity
may in this case require that the freedom of
trade should be restored only by slow gradations,
and with a good deal of reserve and circum
spection. Were those high duties and prohi
bitions taken away all at once, cheaper foreign
goods of the same kind might be poured so fast
into the home market, as to deprive all at once
many thousands of our people of their ordinary
employment and means of subsistence. The

CHAP. II. THE WEALTH OF NATIONS. 203

disorder which this would occasion might no
doubt be very considerable. It would in all
probability, however, be much less than is com
monly imagined, for the two following reasons:

First, all those manufactures, of which any
part is commonly exported to other European
countries without a bounty, could be very little
affected by the freest importation of foreign
goods. Such manufactures must be sold as
cheap abroad as any other foreign goods of the
same quality and kind, and consequently must
be sold cheaper at home. They would still,
therefore, keep possession of the home market,
and though a capricious man of fashion might
sometimes prefer foreign wares, merely because
they were foreign, to cheaper and better goods
of the same kind that were made at home, this
folly could, from the nature of things, extend
to so few, that it could make no sensible impres
sion upon the general employment of the people.
But a great part of all the different branches of
our woollen manufacture, of our tanned leather,
and of our hardware, are annually exported to
other European countries without any bounty,
and these are the manufactures which employ
the greatest number of hands. The silk, perhaps,
is the manufacture which would suffer the most
by this freedom of trade, and after it the linen,
though the latter much less than the former.

Secondly, though a great number of people
should, by thus restoring the freedom of trade,
be thrown all at once out of their ordinary em
ployment and common method of subsistence, it

204< THE NATURE AND CAUSES OF BOOK IV.

would by no means follow that they would there
by be deprived either of employment or sub
sistence. By the reduction of the army and navy
at the end of the late war, more than a hundred
thousand soldiers and seamen, a number equal to
what is employed in the greatest manufactures,
were all at once thrown out of their ordinary
employment ; but, though they no doubt suf
fered some inconveniency, they were not thereby
deprived of all employment and subsistence.
The greater part of the seamen, it is probable,
gradually betook themselves to the merchant-
service as they could find occasion, and in the
mean time both they and the soldiers were ab
sorbed in the great mass of the people, and em
ployed in a great variety of occupations. Not
only no great convulsion, but no sensible disor
der arose from so great a change in the situation
of more than a hundred thousand men, all ac
customed to the use of arms, and many of them
to rapine and plunder. The number of vagrants
was scarce any-where sensibly increased by it,
even the wages of labour were not reduced by it
in any occupation, so far as I have been able to
learn, except in that of seamen in the merchant
service. But if we compare together the habits
of a soldier and of any sort of manufacturer, we
shall find that those of the latter do not tend so
much to disqualify him from being employed in
a new trade, as those of the former from being
employed in any. The manufacturer has always
been accustomed to look for his subsistence from
his labour only: the soldier to expect it from his

CHAP. IT. THE WEALTH OF NATIONS. 205

pay. Application and industry have been familiar
to the one; idleness and dissipation to the other.
But it is surely much easier to change the di
rection of industry from one sort of labour to
another, than to turn idleness and dissipation to
any. To the greater part of manufactures be
sides, it has already been observed, there are
other collateral manufactures of so similar a na
ture, that a workman can easily transfer his in
dustry from one of them to another. The greater
part of such workmen too are occasionally em
ployed in country labour. The stock which
employed them in a particular manufacture be
fore, will still remain in the country to employ
an equal number of people in some other way.
The capital of the country remaining the same,
the demand for labour will likewise be the same,
or very nearly the same, though it may be ex
erted in different places and for different occupa
tions. Soldiers and seamen, indeed, when dis
charged from the king's service, are at liberty
to exercise any trade within any town or place
of Great Britain or Ireland. Let the same na
tural liberty of exercising what species of in
dustry they please, be restored to all his majesty's
subjects, in the same manner as to soldiers and
seamen ; that is, break down the exclusive pri
vileges of corporations, and repeal the statute of
apprenticeship, both which are really encroach
ments upon natural liberty, and add to these the
repeal of the law of settlements, so that a poor
workman, when thrown out of employment
either in one trade or in one place, may seek

206 THE NATURE AND CAUSES OF BOOK iv.

for it in another trade or in another place, with
out the fear either of a prosecution or of a re
moval, and neither the public nor the individuals
will suffer much more from the occasional dis
banding some particular classes of manufac
turers, than from that of soldiers. Our manu
facturers have no doubt great merit with their
country, but they cannot have more than those
who defend it with their blood, nor deserve to
be treated with more delicacy.

To expect, indeed, that the freedom of trade
should ever be entirely restored in Great Bri
tain, is as absurd as to expect that an Oceana or
Utopia should ever be established in it. Not
only the prejudices of the public, but what is
much more unconquerable, the private interests
of many individuals, irresistibly oppose it. Were
the officers of the army to oppose with the same
zeal and unanimity any reduction in the number
of forces, with which master manufacturers set
themselves against every law that is likely to
increase the number of their rivals in the home
market; were the former to animate their sol
diers, in the same manner as the latter inflame
their workmen, to attack with violence and out
rage the proposers of any such regulation ; to at
tempt to reduce the army would be as dangerous
as it has now become to attempt to diminish in
any respect the monopoly which our manufac
turers have obtained against us. This monopoly
has so much increased the number of some par
ticular tribes of them, that, like an overgrown
standing army, they have become formidable to

CHAP. II. THE WEALTH OF NATIONS. 207

the government, and upon many occasions in
timidate the legislature. The member of parlia
ment who supports every proposal for strengthen
ing this monopoly, is sure to acquire not only
the reputation of understanding trade, but great
popularity and influence with an order of men
whose numbers and wealth render them of great
importance. If he opposes them, on the con
trary, and still more if he has authority enough
to be able to thwart them, neither the most ac
knowledged probity, nor the highest rank, nor
the greatest public services, can protect him
from the most infamous abuse and detraction,
from personal insults, nor sometimes from real
danger, arising from the insolent outrage of fu
rious and disappointed monopolists.

The undertaker of a great manufacture, who,
by the home markets being suddenly laid open
to the competition of foreigners, should be
obliged to abandon his trade, would no doubt
suffer very considerably. That part of his capital
which had usually been employed in purchasing
materials and in paying his workmen, might,
without much difficulty, perhaps, find another
employment. But that part of it which was
fixed in workhouses, and in the instruments of
trade, could scarce be disposed of without con
siderable loss. The equitable regard, therefore,
to his interest requires that changes of this kind
should never be introduced suddenly, but slowly,
gradually, and after a very long warning. The
legislature, were it possible that its deliberations
could be always directed, not by the clamorous

208 THE NATURE AND CAUSES OF BOOK IV.

importunity of partial interests, but by an ex
tensive view of the general good, ought upon
this very account, perhaps, to be particularly
careful neither to establish any new monopolies
of this kind, nor to extend further those which
are already established. Every such regulation
introduces some degree of real disorder into the
constitution of the state, which it will be dif
ficult afterwards to cure without occasioning
another disorder.

How far it may be proper to impose taxes
upon the importation of foreign goods, in order,
not to prevent their importation, but to raise a
revenue for government, I shall consider here
after when I come to treat of taxes. Taxes
imposed with a view to prevent or even to di
minish importation, are evidently as destructive
of the revenue of the customs as of the freedom
of trade.

CHAP. III. THE WEALTH OF NATIONS. 209

CHAPTER III.

Of the extraordinary Restraints upon the Im
portation of Goods of almost all Kinds, from
those Countries with which the Balance is sup
posed to be disadvantageous.

PART I.

Of the Unreasonableness of those Restraints even
upon the Principles of the Commercial System.

To lay extraordinary restraints upon the im
portation of goods of almost all kinds, from
those particular countries with which the balance
of trade is supposed to be disadvantageous, is
the second expedient by which the commercial
system proposes to increase the quantity of
gold and silver. Thus in Great Britain, Silesia
lawns may be imported for home consumption,
upon paying certain duties. But French cam-
bricks and lawns are prohibited to be imported,
except into the port of London, there to be ware
housed for exportation. Higher duties are im
posed upon the wines of France than upon those
of Portugal, or indeed of any other country.
By what is called the impost 1692, a duty of
five-and-twenty per cent., of the rate or value,
v.ras laid upon all French goods ; while the goods
of other nations were, the greater part of them,
subjected to much lighter duties, seldom exceed-

VOL. n. r

210 THE NATURE AND CAUSES OF BOOK IV.

ing five per cent. The wine, brandy, salt and
vinegar of France were indeed excepted ; these
commodities being subjected to other heavy du
ties, either by other laws, or by particular clauses
of the same law. In 1696, a second duty of
twenty-five per cent., the first not having been
thought a sufficient discouragement, was im
posed upon all French goods, except brandy; to
gether with a new duty of five-and-twenty pounds
upon the ton of French wine, and another of
fifteen pounds upon the ton of French vinegar.
French goods have never been omitted in any
of those general subsidies, or duties of five per
cent., which have been imposed upon all, or
the greater part of the goods enumerated in the
book of rates. If we count the one-third and
two-third subsidies as making a complete sub
sidy between them, there have been five of these
general subsidies ; so that before the commence
ment of the present war seventy-five per cent,
may be considered as the lowest duty, to which
the greater part of the goods of the growth,
produce, or manufacture of France were liable.
But upon the greater part of goods, those duties
are equivalent to a prohibition. The French in
their turn have, I believe, treated our goods
and manufactures just as hardly ; though I am not
so well acquainted with the particular hardships
which they have imposed upon them. Those
mutual restraints have put an end to almost all
fair commerce between the two nations, and
smugglers are now the principal importers, either
of British goods into France, or of French goods

CHAP. III. THE WEALTH OF NATIONS,

into Great Britain. The principles which I have
been examining in the foregoing chapter took
their origin from private interest and the spirit
of monopoly; those which I am going to exa
mine i& this, from national prejudice and ani
mosity. They are, accordingly, as might well
be expected, still more unreasonable. They are
so, even upon the principles of the commercial
system.

First, though it were certain that in the case
of a free trade between France and England, for
example, the balance would be in favour of
France, it would by no means follow that such
a trade would be disadvantageous to England,
or that the general balance of its whole trade
would thereby be turned more against it. If the
wines of France are better and cheaper than those
of Portugal, or its linens than those of Germany,
it would be more advantageous for Great Britain
to purchase both the wine and the foreign linen
which it had occasion for of France, than of
Portugal and Germany. Though the value of
the annual importations from France would
thereby be greatly augmented, the value of the
whole annual importations would be diminished,
in proportion as the French goods of the same
quality were cheaper than those of the other two
countries. This would be the case, even upon
the supposition that the whole French goods
imported were to be consumed in Great Britain.

But, secondly, a great part of them might be
re-exported to other countries, where, being sold
with profit, they might bring back a return equal

THE NATURE AND CAUSES OF BOOK IV.

in value, perhaps, to the prime cost of the whole
French goods imported. What has frequently
been said of the East India trade might possibly
be true of the French ; that though the greater
part of East India goods were bought with
gold and silver, the re-exportation of a part of
them to other countries, brought back more
gold and silver to that which carried on the
trade than the prime cost of the whole amounted
to. One of the most important branches of the
Dutch trade, at present, consists in the carriage
of French goods to other European countries.
Some part even of the French wine drank in
Great Britain is clandestinely imported from
Holland and Zealand. If there was either a
free trade between France and England, or if
French goods could be imported upon paying
only the same duties as those of other European
nations, to be drawn back upon exportation,
England might have some share of a trade which
is found so advantageous to Holland.

Thirdly, and lastly, there is no certain cri
terion by which we can determine on which
side what is called the balance between any two
countries lies, or which of them exports to the
greatest value. National prejudice and animo
sity, prompted always by the private interest of
particular traders, are the principles which gene
rally direct our judgment upon all questions con
cerning it. There are two criterions, however,
which have frequently been appealed to upon
such occasions, the custom-house books and the
course of exchange. The custom-house books,

CHAP. III. THE WEALTH OF NATIONS. 213

I think, it is now generally acknowledged, are a
very uncertain criterion, on account of the inac
curacy of the valuation at which the greater part
of goods are rated in them. The course of ex
change is, perhaps, almost equally so.

When the exchange between two places, such
as London and Paris, is at par, it is said to be
a sign that the debts due from London to Paris
are compensated by those due from Paris to
London. On the contrary, when a premium is
paid at London for a bill upon Paris, it is said
to be a sign that the debts due from London to
Paris are not compensated by those due from
Paris to London, but that a balance in money
must be sent out from the latter place ; for the
risk, trouble, and expense of exporting which,
the premium is both demanded and given. Bat
the ordinary state of debt and credit between
those two cities must necessarily be regulated, it
is said, by the ordinary course of their dealings
with one another. When neither of them im
ports from the other to a greater amount than it
exports to that other, the debts and credits of
each may compensate one another. But when
one of them imports from the other to a greater
value than it exports to that other, the former
necessarily becomes indebted to the latter in a
greater sum than the latter becomes indebted to
it : the debts and credits of each do not com
pensate one another, and money must be sent out
from that place of which the debts over-balance
the credits. The ordinary course of exchange,
therefore, being an indication of the ordinary

THE NATUHK AND CAUSES OF BOOK IV.

state of debt and credit between two places,
must likewise be an indication of the ordinary
course of their exports and imports, as these
necessarily regulate that state.

But though the ordinary course of exchange
shall be allowed to be a sufficient indication of
the ordinary state of debt and credit between any
two places, it would not from thence follow,
that the balance of trade was in favour of that
place which had the ordinary state of debt and
credit in its favour. The ordinary state of debt
and credit between any two places is not always
entirely regulated by the ordinary course of their
dealings with one another ; but is often influ
enced by that of the dealings of either with many
other places. If it is usual, for example, for
the merchants of England to pay for the goods
which they buy of Hamburg, Dantzic, Riga,
&c. by bills upon Holland, the ordinary state
of debt and credit between England and Holland
will not be regulated entirely by the ordinary
course of the dealings of those two countries with
one another, but will be influenced by that of
the dealings in England with those other places.
England may be obliged to send out every year
money to Holland, though its annual exports to
that country may exceed very much the annual
value of its imports from thence ; and though
what is called the balance of trade may be very
much in favour of England.

In the way, besides, in which the par of ex
change has hitherto been computed, the ordinary
course of exchange can afford no sufficient indi-

CHAP. III. THE WEALTH OF NATIONS. 215

cation that the ordinary state of debt and credit
is in favour of that country which seems to have,
or which is supposed to have, the ordinary course
of exchange in its favour : or, in other words,
the real exchange may be, and, in fact, often is,
so very different from the computed one, that,
from the course of the latter, no certain conclu
sion can, upon many occasions, be drawn con
cerning that of the former.

When for a sum of money paid in England,
containing, according to the standard of the
English mint, a certain number of ounces of
pure silver, you receive a bill for a sum of mo
ney to be paid in France, containing, according
to the standard of the French mint, an equal
number of ounces of pure silver, exchange is
said to be at par between England and France.
When you pay more, you are supposed to give a
premium, and exchange is said to be against
England, and in favour of France. When you
pay less, you are supposed to get a premium, and
exchange is said to be against France, and in
favour of England.

But, first, We cannot always judge of the value
of the current money of different countries by
the standard of their respective mints. In some
it is more, in others it is less worn, clipt, and
otherwise degenerated from that standard. But
the value of the current coin of every country,
compared with that of any other country, is in
proportion not to the quantity of pure silver
which it ought to contain, but to that which it
actuallv does contain. Before the reformation of

216 THE NATURE AND CAUSES OF BOOK iv.

the silver coin in king William's time, exchange
between England and Holland, computed, in
the usual manner, according to the standard of
their respective mints, was five-and-twenty per
cent, against England. But the value of the
current coin of England, as we learn from Mr.
Lowndes, was at that time rather more than five-
and-twenty per cent, below its standard value.
The real exchange, therefore, may even at that
time have been in favour of England, notwith
standing the computed exchange was so much
against it ; a smaller number of ounces of pure
silver, actually paid in England, may have pur
chased a bill for a greater number of ounces of
pure silver to be paid in Holland, and the man
who was supposed to give, may in reality have
got the premium. The French coin was, before
the late reformation of the English gold coin,
much less worn than the English, and was, per
haps, two or three per cent, nearer its standard.
If the computed exchange with France, there
fore, was not more than two or three per cent,
against England, the real exchange might have
been in its favour. Since the reformation of the
gold coin, the exchange has been constantly in
favour of England, and against France.

Secondly, In some countries the expense of
coinage is defrayed by the government ; in others,
it is defrayed by the private people who carry
their bullion to the mint, and the government
even derives some revenue from the coinage. In
England, it is defrayed by the government, and
if you carry a pound weight of standard silver to

CHAP. ill. THE WEALTH OF NATIONS. 217

the mint, you get back sixty-two shillings,
containing a pound weight of the like standard
silver. In France, a duty of eight per cent, is
deducted for the coinage, which not only de
frays the expense of it, but affords a small re
venue to the government. In England, as the
coinage costs nothing, the current coin can
never be much more valuable than the quantity
of bullion which it actually contains. In France,
the workmanship, as you pay for it, adds to the
value, in the same manner as that of wrought
plate. A sum of French money, therefore, con
taining a certain weight of pure silver, is more
valuable than a sum of English money contain
ing an equal weight of pure silver, and must
require more bullion, or other commodities, to
purchase it. Though the current coin of the
two countries, therefore, were equally near the
standards of their respective mints, a sum of
English money could not well purchase a sum
of French money, containing an equal number
of ounces of pure silver, nor consequently a bill
upon France for such a sum. If for such a bill
no more additional money was paid than what
was sufficient to compensate the expense of the
French coinage, the real exchange might be at
par between the two countries, their debts and
credits might mutually compensate one another,
while the computed exchange was considerably
in favour of France. If less than this was paid,
the real exchange might be in favour of Eng
land, while the computed was in favour of
France.

218 THE NATURE AND CAUSES OF BOOK IV.

Thirdly, and lastly, in some places, as at Am
sterdam, Hamburgh, Venice, &c. foreign bills
of exchange are paid in what they call bank
money; while in others, as at London, Lisbon,
Antwerp, Leghorn, &c. they are paid in the
common currency of the country. What is called
bank money is always of more value than the
same nominal sum of common currency. A
thousand guilders in the bank of Amsterdam,
for example, are of more value than a thousand
guilders of Amsterdam currency. The differ
ence between them is called the agio of the
bank, which, at Amsterdam, is generally about
five per cent. Supposing the current money of
the two countries equally near to the standard
of their respective mints, and that the one pays
foreign bills in this common currency, while the
other pays them in bank money, it is evident
that the computed exchange may be in favour
of that which pays in bank money, though the
real exchange should be in favour of that which
pays in current money ; for the same reason that
the computed exchange may be in favour of
that which pays in better money, or in money
nearer to its own standard, though the real ex
change should be in favour of that which pays
in worse. The computed exchange, before the
late reformation of the gold coin, was generally
against London with Amsterdam, Hamburgh,
Venice, and, I believe, writh all other places
which pay in what is called bank money. It
will by no means follow, however, that the real
exchange was against it. Since the reformation

CHAP. in. THE WEALTH OF NATIONS. 219

of the gold coin, it has been in favour of Lon
don even with those places. The computed ex
change has generally been in favour of London
with Lisbon, Antwerp, Leghorn, and, if you
except France, I believe with most other parts
of Europe that pay in common currency; and
it is not improbable that the real exchange was
so too.

Digression concerning Banks of Deposit, par
ticularly concerning that of Amsterdam.

The currency of a great state, such as France,
or England, generally consists almost entirely
of its own coin. Should this currency, there
fore, be at any time worn, clipt, or otherwise
degraded below its standard value, the state
by a reformation of its coin can effectually re
establish its currency. But the currency of a
small state, such as Genoa or Hamburgh, can
seldom consist altogether in its own coin, but
must be made up, in a great measure, of the
coins of all the neighbouring states with which
its inhabitants have a continual intercourse.
Such a state, therefore, by reforming its coin,
will not always be able to reform its currency.
If foreign bills of exchange are paid in this cur
rency, the uncertain value of any sum, of what
is in its own nature so uncertain, must render
the exchange always very much against such a
state, its currency being, in all foreign states,
necessarily valued even below what it is worth.

,

220 THE NATURE AND CAUSES OF BOOK IV.

In order to remedy the inconvenience to
which this disadvantageous exchange must have
subjected their merchants, such small states,
when they began to attend to the interest of
trade, have frequently enacted, that foreign bills
of exchange of a certain value should be paid?
not in common currency, but by an order upon,
or by a transfer in the books of a certain bank,
established upon the credit, and under the pro
tection of the state; this bank being always
obliged to pay, in good and true money, exactly
according to the standard of the state. The
banks of Venice, Genoa, Amsterdam, Ham
burgh, and Nuremberg, seem to have been all
originally established with this view, though
some of them may have afterwards been made
subservient to other purposes. The money of
such banks being better than the common cur
rency of the country, necessarily bore an agio,
which was greater or smaller, according as the
currency was supposed to be more' or less de
graded below the standard of the state. The
agio of the bank of Hamburgh, for example,
which is said to be commonly about fourteen
per cent., is the supposed difference between
the good standard money of the state, and the
clipt, worn, and diminished currency poured
into it from all the neighbouring states.

Before 1609 the great quantity of clipt and
worn foreign coin which the extensive trade of
Amsterdam brought from all parts of Europe,
reduced the value of its currency about nine
per cent, below that of good money fresh from

CHAP. III. THE WEALTH OF NATIONS.

the mint. Such money no sooner appeared than
it was melted down or carried away, as it always
is in such circumstances. The merchants, with
plenty of currency, could not always find a suf
ficient quantity of good money to pay their bills
of exchange ; and the value of those bills, in
spite of several regulations which were made to
prevent it, became in a great measure uncertain.
In order to remedy these inconveniences, a
bank was established in 1 609 under the guarantee
of the city. This bank received both foreign
coin, and the light and worn coin of the country,
as its real intrinsic value in the good standard
money of the country, deducting only so much as
was necessary for defraying the expense of coin
age, and the other necessary expense of ma
nagement. For the value which remained, after
this small deduction was made, it gave a credit
in its books. This credit was called bank mo
ney, which, as it represented money exactly ac
cording to the standard of the mint, was always
of the same real value, and intrinsically worth
more than current money. It was at the same
time enacted, that all bills drawn upon or nego
tiated at Amsterdam of the value of six hundred
guilders and upwards should be paid in bank
money, which at once took away all uncer
tainty in the value of those bills. Every mer
chant, in consequence of this regulation, was
obliged to keep an account with the bank in
order to pay his foreign bills of exchange, which
necessarily occasioned a certain demand for bank
money.

THE NATURE AND CAUSES OF BOOK IV.

Bank money, over and above both its intrin
sic superiority to currency, and the additional
value which this demand necessarily gives it, has
likewise some other advantages. It is secure
from fire, robbery, and other accidents ; the city
of Amsterdam is bound for it ; it can be paid
away by a simple transfer, without the trouble
of counting, or the risk of transporting it from
one place to another. In consequence of those
different advantages, it seems from the beginning
to have born an agio, and it is generally be
lieved that all the money originally deposited in
the bank was allowed to remain there, nobody
caring to demand payment of a debt which he
could sell for a premium in the market. By
demanding payment of the bank, the owner of
a bank credit would lose this premium. As a
shilling fresh from the mint will buy no more
goods in the market than one of our common
worn shillings, so the good and true money
which might be brought from the coffers of the
bank into those of a private person, being mixed
and confounded with the common currency of
the country, would be of no more value than
that currency, from which it could no longer
be readily distinguished. While it remained in
the coffers of the bank, its superiority was known
and ascertained. When it had come into those
of a private person, its superiority could not well
be ascertained without more trouble than per
haps the difference was worth. By being brought
from the coffers of the bank, besides, it lost all
the other advantages of bank money ; its secu-

CHAP. III. THE WEALTH OF NATIONS.

rity, its easy and safe transferability, its use in
paying foreign bills of exchange. Over and
above all this, it could not be brought from those
coffers, is will appear by and by, without pre
viously paying for the keeping.

Those deposits of coin, or those deposits
which the bank was bound to restore in coin,
constituted the original capital of the bank, or
the whole value of what was represented by what
is called bank money. At present they are sup
posed to constitute but a very small part of it.
In order to facilitate the trade in bullion, the
bank has been for these many years in the prac
tice of giving credit in its books upon deposits of
gold and silver bullion. This credit is generally
about five per cent, below the mint price of such
bullion. The bank grants at the same time
what is called a recipice, or receipt, entitling the
person who makes the deposit, or the bearer, to
take out the bullion again at any time within six
months, upon transferring to the bank a quan
tity of bank money equal to that for which cre
dit had been given in its books when the de
posit was made, and upon paying one-fourth per
cent, for the keeping, if the deposit was in
silver ; and one-half per cent, if it was in gold ;
but at the same time declaring, that in default of
such payment, and upon the expiration of this
term, the deposit should belong to the bank at
the price at which it had been received, or for
which credit had been given in the transfer
books. What is thus paid for the keeping of
the deposit may be considered as a sort of ware-

224 THE NATURE AND CAUSES OF BOOK IV.

house rent ; and why this warehouse rent should
be so much dearer for gold than for silver, seve
ral different reasons have been assigned. The
fineness of gold, it has been said, is more dif
ficult to be ascertained than that of silver. Frauds
are more easily practised, and occasion a greater
loss in the most precious metal. Silver, besides,
being the standard metal, the state, it has been
said, wishes to encourage more the making of
deposits of silver than those of gold.

Deposits of bullion are most commonly made
when the price is somewhat lower than ordinary ;
and they are taken out again when it happens to
rise. In Holland the market price of bullion is
generally above the mint price, for the same
reason that it wras so in England before the late
reformation of the gold coin. The difference is
said to be commonly from about six to sixteen
stivers upon the mark, or eight ounces of silver
of eleven parts fine, and one part alloy. The
bank price, or the credit which the bank gives
for the deposits of such silver (when made in fo
reign coin, of which the fineness is well known and
ascertained, such as Mexico dollars), is twenty-
two guilders the mark ; the mint price is about
twenty-three guilders, and the market price is
from twenty- three guilders six, to twenty-three
guilders sixteen stivers, or from twro to three
per cent, above the mint price*. The propor-

* The following are the prices at which the Bank of Am
sterdam at present (September, 1775,,) receives bullion and
coin of different kinds :

CHAP. III. THE WEALTH OF NATIONS. 225

tions between the bank price, the mint price, and
the market price of gold bullion, are nearly the
same. A person can generally sell his receipt for
the difference between the mint price of bullion
and the market price. A receipt for bullion is
almost always worth something, and it very sel
dom happens, therefore, that any body suffers
his receipt to expire, or allows his bullion to fall
to the bank at the price at which it had been
received, either by not taking it out before the
end of the six months, or by neglecting to pay
the one-fourth or one-half per cent, in order to

SILVER.

Mexico dollars 1

^ , Guilders.

French crowns

*•« i> i_ :>i ' I 13 — 22 per mark.

English silver coin J

Mexico dollars new coin - 21 10
Ducatoons - 3

Rix dollars - 2 8

Bar silver containing -4- fine silver 21 per mark, and in
this proportion down to |- fine, on which 5 guilders are
given.

Fine bars, 23 per mark.

GOLD.

Portugal coin 1

Guineas >- B — 3 1 0 per mark.

Louis d'ors new J

Ditto old - - 300

New ducats - 4 ]g 8 per ducat.

Bar or ingot gold is received in proportion to its fineness
compared with the above foreign gold coin. Upon fine bars
the bank gives 340 per mark. In general, however some
thing more is given upon coin of a known fineness, than upon
gold and silver bars, of which the fineness cannot be ascer
tained but by a process of melting and assaying.
VOL. II. Q

226 THE NATURE AND CAUSES OF BOOK IV.

obtain a new receipt for another six months.
This, however, though it happens seldom, is
said to happen sometimes, and more frequently
with regard to gold, than with regard to silver,
on account of the higher warehouse-rent which
is paid for the keeping of the more precious
metal.

The person who by making a deposit of bul
lion obtains both a bank credit and a receipt,
pays his bills of exchange as they become due
with his bank credit ; and either sells or keeps his
receipt according as he judges that the price of
bullion is likely to rise or to fall. The receipt
and the bank credit seldom keep long together,
and there is no occasion that they should. The
person who has a receipt, and who wants to
take out bullion, finds always plenty of bank
credits, or bank money, to buy at the ordinary
price ; and the person who has bank money,
and wants to take out bullion, finds receipts
always in equal abundance.

The owners of bank credits, and the holders
of receipts, constitute two different sorts of cre
ditors against the bank. The holder of a receipt
cannot draw out the bullion for which it is
granted, without re-assigning to the bank a sum
of bank money equal to the price at which the
bullion had been received. If he has no bank
money of his own, he must purchase it of those
who have it. The owner of bank money cannot
draw out bullion without producing to the bank
receipts for the quantity which he wants. If he
has none of his own, he must buy them of those

CHAP. III. THE WEALTH OF NATIONS. 227

who have them. The holder of a receipt, when
he purchases bank money, purchases the power
of taking out a quantity of bullion, of which the
mint price is five per cent, above the bank price.
The agio of five per cent., therefore, which he
commonly pays for it, is pafd, not for an ima
ginary, but for a real value. The owner of bank
money when he purchases a receipt purchases
the power of taking out a quantity of bullion of
which the market price is commonly from two
to three per cent, above the mint price. The
price which he pays for it, therefore, is paid
likewise for a real value. The price of the re
ceipt, and the price of the bank money, com
pound or make up between them the full value
or price of the bullion.

Upon deposits of the coin current in the coun
try, the bank grants receipts likewise as well as
bank credits ; but those receipts are frequently
of no value, and will bring no price in the mar
ket. Upon ducatoons, for example, which in
the currency pass for three guilders three stivers
each, the bank gives a credit of three guilders
only, or five per cent, below their current value.
It grants a receipt likewise entitling the bearer
to take out the number of ducatoons deposited
at any time within six months, upon paying one-
fourth per cent, for the keeping. This receipt
will frequently bring no price in the market.
Three guilders bank money generally sell in the
market for three guilders three stivers, the full
value of the ducatoons, if they were taken out of
the bank ; and before they can be taken out,

2°28 THE NATURE AND CAUSES OF BOOK IV.

one- fourth per cent, must be paid for the keep
ing, which would be mere loss to the holder of
the receipt. If the agio of the bank, however,
should at any time fall to three per cent, such
receipts might bring some price in the market,
and might sell for. one and three-fourths per
cent. But the agio of the bank being now gene
rally about five per cent, such receipts are fre
quently allowed to expire, or, as they express
it, to fall to the bank. The receipts which are
given for deposits of gold ducats fall to it yet
more frequently, because a higher warehouse-
rent, or one half per cent, must be paid for the
keeping of them before they can be taken out
again. The five per cent, which the bank
gains, when deposits either of coin or bullion
are allowed to fall to it, may be considered as
the warehouse-rent for the perpetual keeping of
such deposits.

The sum of bank money for which the re
ceipts are expired must be very considerable. It
must comprehend the whole original capital of
the bank, which, it is generally supposed, has
been allowed to remain there from the time it
was first deposited, nobody caring either to re
new his receipt or to take out his deposit, as,
for the reasons already assigned, neither the one
nor the other could be done without loss. But
whatever may be the amount of this sum, the
proportion which it bears to the whole mass of
bank money is supposed to be very small. The
bank of Amsterdam has for these many years
past been the great warehouse of Europe for bul-

CHAP. in. THE WEALTH OF NATIONS. 229

lion, for which the receipts are very seldom al
lowed to expire, or, as they express it, to fall to
the bank. The far greater part of the bank
money, or of the credits upon the books of the
bank, is supposed to have been created, for these
many years past, by such deposits which the
dealers in bullion are continually both making
and withdrawing.

No demand can be made upon the bank but
by means of a recipice or receipt. The smaller
mass of bank money, for which the receipts are
expired, is mixed and confounded with the
much greater mass for which they are still in
force; so that, though there may be a consider
able sum of bank money, for which there are no
receipts, there is no specific sum or portion of
it, which may not at any time be demanded by
one. The bank cannot be debtor to two persons
for the same thing; and the owner of bank
money who has no receipt, cannot demand pay
ment of the bank till he buys one. In ordinary
and quiet times, he can find no difficulty in get
ting one to buy at the market price, which ge
nerally corresponds with the price at which he
can sell the coin or bullion it intitles him to
take out of the bank.

It might be otherwise during a public cala
mity; an invasion, for example, such as that
of the French in 1672. The owners of bank
money being then all eager to draw it out of the
bank, in order to have it in their own keeping,
the demand for receipts might raise their price
to an exorbitant height. The holders of them

230 THE NATURE AND CAUSES OF BOOK IV,

might form extravagant expectations, and, in
stead of two or three per cent, demand half the
bank money for which credit had been given
upon the deposits that the receipts had respec
tively been granted for. The enemy, informed
of the constitution of the bank, might even buy
them up, in order to prevent the carrying away
of the treasure. In such emergencies, the bank,
it is supposed, would break through its ordinary
rule of making payment only to the holders of
receipts. The holders of receipts, who had no
bank money, must have received within two or
three per cent, of the value of the deposit for
which their respective receipts had been granted.
The bank, therefore, it is said, would in this case
make no scruple of paying, either with money
or bullion, the full value of what the owners of
bank money who could get no receipts were
credited for in its books; paying at the same
time two or three per cent, to such holders of
receipts as had no bank money, that being the
whole value which in this state of things could
justly be supposed clue to them.

Even in ordinary and quiet times it is the
interest of the holders of receipts to depress the
agio, in order either to buy bank money (and
consequently the bullion, which their receipts
would then enable them to take out of the bank)
so much cheaper, or to sell their receipts to
those who have bank money, and who want to
take out bullion, so much dearer; the price of
a receipt being generally equal to the difference
between the market price of bank money and

CHAP. III. THE WEALTH OF NATIONS.

that of the coin or bullion for which the receipt
had been granted. It is the interest of the owners
of bank money, on the contrary, to raise the
agio, in order either to sell their bank money so
much dearer, or to buy a receipt so much cheaper.
To prevent the stock-jobbing tricks which those
opposite interests might sometimes occasion, the
bank has of late years come to the resolution to
sell at all times bank money for currency at five
per cent, agio, and to buy it in again at four per
cent. agio. In consequence of this resolution
the agio can never either rise above five, or sink
below four per cent, and the proportion between
the market price of bank and that of current
money is kept at all times very near to the pro
portion between their intrinsic values. Before
this resolution was taken, the market price of
bank money used sometimes to rise so high as
nine per cent, agio, and sometimes to sink so
low as par, according as opposite interests hap
pened to influence the market.

The bank of Amsterdam professes to lend out
no part of what is deposited with it, but, for
every guilder for which it gives credit in its
books, to keep in its repositories the value of a
guilder either in money or bullion. That it keeps
in its repositories all the money or bullion for
which there are receipts in force, for which it is
at all times liable to be called upon, and which,
in reality, is continually going from it and re
turning to it again, cannot well be doubted.
But whether it does so likewise with regard to
that part of its capital, for which the receipts

232 THE NATURE AND CAUSES OF BOOK TV.

are long ago expired, for which in ordinary and
quiet times it cannot be called upon, and which
in reality is very likely to remain with it for ever,
or as long as the States of the United Provinces
subsist, may perhaps appear more uncertain.
At Amsterdam, however, no point of faith is
better established than that for every guilder,
circulated as bank money, there is a correspond
ent guilder in gold or silver to be found in the
treasure of the bank. The city is guarantee that
it should be so. The bank is under the direction
of the four reigning burgomasters, who are
changed every year. Each new set of burgo
masters visits the treasure, compares it with the
books, receives it upon oath, and delivers it
over, with the same awful solemnity, to the set
which succeeds; and in that sober and religious
country oaths are not yet disregarded. A rota
tion of this kind seems alone a sufficient security
against any practices which cannot be avowed.
Amidst all the revolutions which faction has ever
occasioned in the government of Amsterdam, the
prevailing party has at no time accused their
predecessors of infidelity in the administration
of the bank. No accusation could have affected
more deeply the reputation and fortune of the
disgraced party, and if such an accusation could
have been supported, we may be assured that it
would have been brought. In 1672, when the
French king was at Utrecht, the bank of Am
sterdam paid so readily as left no doubt of the
fidelity with which it had observed its engage
ments. Some of the pieces which were then

CHAP. Hi. THE WEALTH OF NATIONS. 233

brought from its repositories appeared to have
been scorched with the fire which happened in
the town house soon after the bank was esta
blished. Those pieces, therefore, must have
lain there from that time.

What may be the amount of the treasure in
the bank, is a question which has long employed
the speculations of the curious. Nothing but
conjecture can be offered concerning it. It is
generally reckoned that there are about two
thousand people who keep accounts with the
bank, and allowing them to have, one with an
other, the value of fifteen hundred pounds ster
ling lying upon their respective accounts (a very
large allowance) the whole quantity of bank
money, and consequently of treasure in the bank,
will amount to about three millions sterling, or,
at eleven guilders the pound sterling, thirty-
three millions of guilders ; a great sum, and
sufficient to carry on a very extensive circula
tion ; but vastly below the extravagant ideas
which some people have formed of this treasure.

The city of Amsterdam derives a considerable
revenue from the bank. Besides what may be
called the warehouse-rent above mentioned, each
person, upon first opening an account with the
bank, pays a fee often guilders ; and for every
new account three guilders three stivers ; for
every transfer two stivers ; and if the transfer is
for less than three hundred guilders, six stivers,
in order to discourage the multiplicity of small
transactions. The person who neglects to ba
lance his account twice in the year, forfeits

THE NATURE AND CAUSES OF BOOK IV.

twenty-five guilders. The person who orders a
transfer for more than is upon his account, is
obliged to pay three per cent, for the sum over
drawn, and his order is set aside into the bar
gain. The bank is supposed too to make a con
siderable profit by the sale of the foreign coin or
bullion which sometimes falls to it by the ex
piring of receipts, and which is always kept till
it can be sold with advantage. It makes a profit
likewise by selling bank money at five per cent,
agio, and buying it in at four. These different
emoluments amount to a good deal more than
what is necessary for paying the salaries of
officers, and defraying the expense of manage
ment. What is paid for the keeping of bullion
upon receipts is alone supposed to amount to a
neat annual revenue of between one hundred
and fifty thousand and two hundred thousand
guilders. Public utility, however, and not re
venue, was the original object of this institution.
Its object was to relieve the merchants from the
inconvenience of a disadvantageous exchange.
The revenue which has arisen from it was un
foreseen, and may be considered as accidental.
But it is now time to return from this long di
gression, into which I have been insensibly led
in endeavouring to explain the reasons why the
exchange between the countries which pay in
what is called bank money, and those which
pay in common currency, should generally ap
pear to be in favour of the former, and against
the latter. The former pay in a species of money
of which the intrinsic value is always the same,

CHAP. III. THE WEALTH OF NATIONS. 235

and exactly agreeable to the standard of their
respective mints ; the latter is a species of money
of which the intrinsic value is continually vary
ing, and is almost always more or less below
that standard.

PART II.

Of the Unreasonableness of those extraordinary
Restraints upon other Principles.

IN the foregoing Part of this Chapter I have
endeavoured to show, even upon the principles
of the commercial system, how unnecessary it
is to lay extraordinary restraints upon the im
portation of goods from those countries, with
which the balance of trade is supposed to be
disadvantageous.

Nothing, however, can be more absurd than
this whole doctrine of the balance of trade, upon
which, not only these restraints, but almost all
the other regulations of commerce are founded.
When two places trade with one another, this
doctrine supposes that, if the balance be even,
neither of them either loses or gains ; but if it
leans in any degree to one side, that one of them
loses, and the other gains in proportion to its
declension from the exact equilibrium. Both
suppositions are false. A trade which is forced
by means of bounties and monopolies, may be,
and commonly is, disadvantageous to the country
in whose favour it is meant to be established, as
I shall endeavour to show hereafter. Uut that

236 THE NATU11E AND CAUSES OF BOOK IV.

trade which, without force or constraint, is na
turally and regularly carried on between any
two places, is always advantageous, though not
always equally so, to both.

By advantage or gain, I understand, not the
increase of the quantity of gold and silver, but
that of the exchangeable value of the annual
produce of the land and labour of the country,
or the increase of the annual revenue of its in
habitants.

If the balance be even, and if the trade be
tween the two places consist altogether in the
exchange of their native commodities, they will,
upon most occasions, not only both gain, but
they will gain equally, or very near equally:
each will in this case afford a market for a part
of the surplus produce of the other : each will
replace a capital which had been employed in
raising and preparing for the market this part of
the surplus produce of the other, and which had
been distributed among, and given revenue and
maintenance to, a certain number of its inhabit
ants. Some part of the inhabitants of each, there
fore, will directly derive their revenue and
maintenance from the other. As the commodi
ties exchanged too are supposed to be of equal
value, so the two capitals employed in the trade
will, upon most occasions, be equal, or very
nearly equal ; and both being employed in rais
ing the native commodities of the two countries,
the revenue and maintenance which their distri
bution will afford to the inhabitants of each will
be equal, or very nearly equal. This revenue

CHAP. III. THE WEALTH OF NATIONS. 237

and maintenance, thus mutually afforded, will
be greater or smaller in proportion to the extent
of their dealings. If these should annually
amount to an hundred thousand pounds, for ex
ample, or to a million on each side, each of them
will afford an annual revenue, in the one case
of an hundred thousand pounds, in the other,
of a million, to the inhabitants of the other.

If their trade should be of such a nature that
one of them exported to the other nothing but
native commodities, while the returns of that
other consisted altogether in foreign goods ; the
balance, in this case, would still be supposed
even, commodities being paid for with commo
dities. They would, in this case too, both gain,
but they would not gain equally ; and the inha
bitants of the country which exported nothing
but native commodities would derive thegreatest
revenue from the trade. If England, for ex
ample, should import from France nothing but
the native commodities of that country, and,
not having such commodities of its own as were
in demand there, should annually repay them by
sending thither a, large quantity of foreign goods,
tobacco, we shall suppose, and East India goods;
this trade, though it would give some revenue to
the inhabitants of both countries, would give
more to those of France than to those of Eng
land. The whole French capital annually em
ployed in it would annually be distributed among
the people of France. But that part of the En
glish capital only which was employed in pro
ducing the English commodities with which those

238 THE NATURE AND CAUSES OF BOOK IV.

foreign goodswere purchased, would be annually
distributed among the people of England. The
greater part of it would replace the capitals
which had been employed in Virginia, Indostan,
and China, and which had given revenue and
maintenance to the inhabitants of those distant
countries. If the capitals were equal, or nearly
equal, therefore, this employment of the French
capital would augment much more the revenue
of the people of France than that of the English
capital wouid the revenue of the people of Eng
land. France would in this case carry on a di
rect foreign trade of consumption with England ;
whereas England would carry on a round-about
trade of the same kind with France. The differ
ent effects of a capital employed in the direct,
and of one employed in the round-about foreign
trade of consumption, have already been fully
explained.

There is not, probably, between any two
countries, a trade which consists altogether in
the exchange either of native commodities on
both sides, or of native commodities on one side
and of foreign goods on the other. Almost all
countries exchange with one another partly na
tive and partly foreign goods. That country,
however, in whose cargoes there is the greatest
proportion of native, and the least of foreign
goods will always be the principal gainer.

If it was not with tobacco and East India
goods, but with gold and silver, that England
paid for the commodities annually imported from
France, the balance, in this case, would be sup-

CHAP. ill. THE WEALTH OF NATIONS, 239

posed uneven, commodities not being paid for
with commodities, but with gold and silver.
The trade, however, would in this case, as in
the foregoing, give some revenue to the inha
bitants of both countries, but more to those of
France than to those of England. It would give
some revenue to those of England. The capital
which had been employed in producing the En
glish goods that purchased this gold and silver,
the capital which had been distributed among,
and given revenue to, certain inhabitants of Eng
land would thereby be replaced, and enabled
to continue that employment. The whole capi
tal of England would no more be diminished by
this exportation of gold and silver, than by the
exportation of an equal value of any other goods.
On the contrary, it would, in most cases, be
augmented. No goods are sent abroad but those
for which the demand is supposed to be greater
abroad than at home, and of which the returns
consequently, it is expected, will be of more value
at home than the commodities exported. If the
tobacco which, in England, is worth only a
hundred thousand pounds, when sent to Erance
will purchase wine which is, in England, worth
a hundred and ten thousand pounds, the ex
change will augment the capital of England by
ten thousand pounds. If a hundred thousand
pounds of English gold, in the same manner,
purchase French wine, which, in England, is
worth a hundred and ten thousand, this exchange
will equally augment the capital of England by
ten thousand pounds. As a merchant who has

240 THE NATURE AND CAUSES OF BOOK IV.

a hundred and ten thousand pounds worth of
wine in his cellar, is a richer man than he who
has only a hundred thousand pounds worth of
tobacco in his warehouse, so is he likewise a
richer man than he who has only a hundred thou
sand pounds worth of gold in his coffers. He
can put into motion a greater quantity of in
dustry, and give revenue, maintenance, and em
ployment, to a greater number of people than
either of the other two. But the capital of the
country is equal to the capital of all its differ
ent inhabitants, and the quantity of industry
which can be annually maintained in it is equal
to what all those different capitals can maintain.
Both the capital of the country, therefore, and
the quantity of industry which can be annually
maintained in it, must generally be augmented
by this exchange. It would, indeed, be more
advantageous for England that it could purchase
the wines of France with its own hardware and
broad cloth, than with either the tobacco of
Virginia, or the gold and silver of Brazil and
Peru. A direct foreign trade of consumption is
always more advantageous than a round-about
one. But a round-about foreign trade of con
sumption, which is carried on with gold and sil
ver, does not seem to be less advantageous than
any other equally round-about one. Neither is
a country which has no mines more likely to be
exhausted of gold and silver by this annual ex
portation of those metals, than one which does
not grow tobacco by the like annual exportation
of that plant. As a country which has where-

CHAP. in. THE WEALTH OF NATIONS.

withal to buy tobacco will never be long in want
of it, so neither will one be long in want of gold
and silver which has wherewithal to purchase
those metals.

It is a losing trade, it is said, which a work
man carries on with the alehouse ; and the trade
which a manufacturing nation would naturally
carry on with a wine country, may be considered
as a trade of the same nature. I answer, that
the trade with the alehouse is not necessarily a
losing trade. In its own nature it is just as ad
vantageous as any other, though, perhaps, some
what more liable to be abused. The employ
ment of a brewer, and even that of a retailer of
fermented liquors, are as necessary divisions of
labour as any other. It will generally be more
advantageous for a workman to buy of the
brewer the quantity he has occasion for, than to
brew it himself, and if he is a poor workman, it
will generally be more advantageous for him to
buy it, by little and little, of the retailer than a
large quantity of the brewer. He may no doubt
buy too much of either, as he may of any other
dealers in his neighbourhood, of the butcher, if
he is a glutton, or of the draper, if he affects to
be a beau among his companions. It is advan
tageous to the great body of workmen, notwith
standing, that all these trades should be free,
though this freedom may be abused in all of
them, and is more likely to be so, perhaps, in
some than in others. Though individuals, be
sides, may sometimes ruin their fortunes by an
excessive consumption of fermented liquors, there

VOL. II. R

THE NATURE AND CAUSES OF BOOK IV.

seems to be no risk that a nation should do so.
Though in every country there are many people
who spend upon such liquors more than they can
afford, there are always many more who spend
less. It deserves to be remarked too, that, if we
consult experience, the cheapness of wine seems
to be a cause, not of drunkenness, but of so
briety. The inhabitants of the wine countries
are in general the soberest people in Europe ;
witness the Spaniards, the Italians, and the in
habitants of the .southern provinces of France.
People are seldom guilty of excess in what is
their daily fare. Nobody affects the character of
liberality and good fellowship, by being profuse
of a liquor which is as cheap as small beer. On
the contrary, in the counries, which, either from
excessive heat or cold, produce no grapes, and
where wine consequently is dear and a rarity,
drunkenness is a common vice, as among the
northern nations, and all those who live between
the tropics, the negroes, for example, on the
coast of Guinea. When a French regiment
comes from some of the northern provinces of
France, where wine is somewhat dear, to be
quartered in the southern, where it is very cheap,
the soldiers, I have frequently heard it observed,
are at first debauched by the cheapness and no
velty of good wine ; but after a few months re
sidence, the greater part of them become as sober
as the rest of the inhabitants. Were the duties
upon foreign wines, and the excises upon malt,
beer, and ale, to be taken away all at once, it
mi^ht, in the same manner, occasion in Great

CHAP. IH. THE WEALTH OF NATIONS. 248

Britain a pretty general and temporary drunken
ness among the middling and inferior ranks of
people, which would probably be soon followed
by a permanent and almost universal sobriety.
At present drunkenness is by no means the vice
of people of fashion, or of those who can easily
afford the most expensive liquors. A gentleman
drunk with ale, has scarce ever been seen among
us. The restraints upon the wine trade in Great
Britain, besides, do not so much seem calculated
to hinder the people from going, if I may say
so, to the alehouse, as from going where they
can buy the best and cheapest liquor. They fa
vour the wine trade of Portugal, and discourage
that of France. The Portuguese, it is said, in-
deed, are better customers for our manufactures
than the French, and should therefore be encou
raged in preference to them. As they give us
their custom, it is pretended, we should give
them ours. The sneaking arts of underling
tradesmen are thus erected into political maxims
for the conduct of a great empire ; for it is the
most underling tradesmen only who make it a
rule to employ chiefly their own customers. A
great trader purchases his goods always where
they are cheapest and best, without regard to
any little interest of this kind.

By such maxims as these, however, nations
have been taught that their interest consisted in
beggaring all their neighbours. Each nation
has been made to look with an invidious eye
upon the prosperity of all the nations with which
it trades, and to consider their gain as its own

u 2

244 THE NATURE AND CAUSES OF BOOK iv

loss. Commerce, which ought naturally to be,
among nations, as among individuals, a bond of
union and friendship, has become the most fer
tile source of discord and animosity. The ca
pricious ambition of kings and ministers has not,
during the present and the preceding century,
been more fatal to the repose of Europe, than
the impertinent jealousy of merchants and ma
nufacturers. The violence and injustice of the
rulers of mankind is an ancient evil, for which,
I am afraid, the nature of human affairs can
scarce admit of a remedy. But the mean rapa
city, the monopolising spirit of merchants and
manufacturers, who neither are, nor ought to
be, the rulers of mankind, though it cannot per
haps be corrected, may very easily be prevented
from disturbing the tranquillity of any body but
themselves.

That it was the spirit of monopoly which ori
ginally both invented and propagated this doc
trine, cannot be doubted: and they who first
taught it were by no means such fools as they
who believed it. In every country it always is and
must be the interest of the great body of the peo
ple to buy whatever they want of those who sell
it cheapest. The proposition is so very manifest,
that it seems ridiculous to take any pains to prove
it; nor could it ever have been called in question,
had not the interested sophistry of merchants and
manufacturers confounded the common sense of
mankind. Their interest is, in this respect,
directly opposite to that of the great body of
the people. As it is the interest of the freemen

CHAP. III. THE WEALTH OF NATIONS.

of a corporation to hinder the rest of the inha
bitants from employing any workmen but them
selves, so it is the interest of the merchants and
manufacturers of every country to secure to
themselves the monopoly of the home market.
Hence in Great Britain, and in most other Eu
ropean countries, the extraordinary duties upon
almost all goods imported by alien merchants.
Hence the high duties and prohibitions upon all
those foreign manufactures which can come into
competition with our own. Hence too the ex
traordinary restraints upon the importation of
almost all sorts of goods from those countries
with which the balance of trade is supposed to
be disadvantageous ; that is, from those against
whom national animosity happens to be most
violently inflamed.

The wealth of a neighbouring nation, how
ever, though dangerous in war and politics, is
certainly advantageous in trade. In a state of
hostility it may enable our enemies to maintain
fleets and armies superior to our own ; but in a
state of peace and commerce it must likewise
enable them to exchange with us to a greater
value, and to afford a better market, either for
the immediate produce of our own industry, or
for whatever is purchased with that produce.
As a rich man is likely to be a better customer
to the industrious people in his neighbourhood,
than a poor, so is likewise a rich nation. A rich
man, indeed, who is himself a manufacturer, is
a very dangerous neighbour to all those who
deal in the same way. All the rest of the neigh-

246 THE NATURE AND CAUSES OF BOOK IT.

bourhood, however, by far the greatest number,
profit by the good market which his expense
affords them. They even profit by his under
selling the poorer workmen who deal in the same
way with him. The manufacturers of a rich
nation, in the same manner, may no doubt be
very dangerous rivals to those of their neigh
bours. This very competition, however, is ad
vantageous to the great body of the people, who
profit greatly besides by the good market which
the great expense of such a nation affords them
in every other way. Private people who want to
make a fortune, never think of retiring to the
remote and poor provinces of the country, but
resort either to the capital, or to some of the great
commercial towns. They know, that, where
little wealth circulates, there is little to be got,
but that where a great deal is in motion, some
share of it may fall to them. The same maxim
which would in this manner direct the common
sense of one, or ten, or twenty individuals, should
regulate the judgment of one, or ten, or twenty
millions, and should make a whole nation regard
the riches of its neighbours, as a probable cause
and occasion for itself to acquire riches. A na
tion that would enrich itself by foreign trade, is
certainly most likely to do so when its neighbours
are all rich, industrious, and commercial na
tions. A great nation surrounded on all sides by
wandering savages and poor barbarians might,
no doubt, acquire riches by the cultivation of its
own lands, and by its own interior commerce,
but not by foreign trade. It seems to have been

CHAP. HI. THE WEALTH OF NATIONS. 247

in this manner that the ancient Egyptians and
the modern Chinese acquired their great wealth.
The ancient Egyptians, it is said, neglected fo
reign commerce, and the modern Chinese, it is
known, hold it in the utmost contempt, and
scarce deign to afford it the decent protection
of the laws. The modern maxims of foreign
commerce, by aiming at the impoverishment of
all our neighbours, so far as they are capable of
producing their intended effect, tend to ren
der that very commerce insignificant and con
temptible.

It is in consequence of these maxims that the
commerce between France arid England has in
both countries been subjected to so many dis
couragements and restraints. If those two coun
tries, however, were to consider their real in
terest, without either mercantile jealousy or na
tional animosity, the commerce of France might
be more advantageous to Great Britain than that
of any other country, and for the same reason
that of Great Britain to France. France is the
nearest neighbour to Great Britain. In the trade
between the southern coast of England and the
northern and north-western coasts of France, the
returns might be expected, in the same manner
as in the inland trade, four, five, or six times in
the year. The capital, therefore, employed in
this trade, could in each of the two countries
keep in motion, four, five, or six times the quan
tity of industry, and afford employment and sub
sistence to four, five, or six times the number of
people, which no equal capital could do in the

5248 THE NATURE AND CAUSES OP BOOK iv.

greater part of the other branches of foreign
trade. Between the parts of France and Great
Britain most remote from one another, the re
turns might be expected, at least, once in the
year, and even this trade would so far be at least
equally advantageous as the greater part of the
other branches of our foreign European trade.
It would be, at least, three times more advan
tageous than the boasted trade with our North
American colonies, in which the returns were
seldom made in less than three years, frequently
not in less than four or five years. France, be
sides, is supposed to contain twenty-four mil
lions of inhabitants. Our North American co
lonies, were never supposed to contain more than
three millions : and France is a much richer
country than North America; though, on account
of the more unequal distribution of riches, there
is much more poverty and beggary in the one
country, than in the other. France, therefore,
could afford a market at least eight times more
extensive, and, on account of the superior fre
quency of the returns, four and twenty times
more advantageous, than that which our North
American colonies ever afforded. The trade of
Great Britain would be just as advantageous to
France, and, in proportion to the wealth, popu
lation, and proximity of the respective countries,
would have the same superiority over that which
France carries on with her own colonies. Such
is the very great difference between that trade
which the wisdom of both nations has thought

CHAP. III. THE WEALTH OF NATIONS.

proper to discourage, and that which it has fa
voured the most.

But the very same circumstances which would
have rendered an open and free commerce be
tween the two countries so advantageous to both,
have occasioned the principal obstructions to
that commerce. Being neighbours, they are
necessarily enemies, and the wealth and power
of each becomes, upon that account, more for
midable to the other ; and what would increase
the advantage of national friendship, serves only
to inflame the violence of national animosity.
They are both rich and industrious nations ; and
the merchants and manufacturers of each, dread
the competition of the skill and activity of those
of the other. Mercantile jealousy is excited, and
both inflames, and is itself inflamed, by the
violence of national animosity: and the traders
of both countries have announced, with all the
passionate confidence of interested falsehood,
the certain ruin of each, in consequence of that
unfavourable balance of trade, which, they pre
tend, would be the infallible effect of an unre
strained commerce with the other.

There is no commercial country in Europe of
which the approaching ruin has not frequently
been foretold by the pretended doctors of this
system, from an unfavourable balance of trade.
After all the anxiety, however, which they have
excited about this, after all the vain attempts of
almost all trading nations to turn that balance in
their own favour and against their neighbours,
it does not appear that any one nation in Europe

250 THE NATURE AND CAUSES OF BOOK IV.

has been in any respect impoverished by this
cause. Every town and country, on the con
trary, in proportion as they have opened their
ports to all nations, instead of being ruined by
this free trade, as the principles of the com
mercial system would lead us to expect, have
been enriched by it. Though there are in Eu
rope, indeed, a few towns which in some respects
deserve the name of free ports, there is no coun
try which does so. Holland, perhaps, approaches
the nearest to this character of any, though still
very remote from it : and Holland, it is acknow
ledged, not only derives its whole wealth, but
a great part of its necessary subsistence, from
foreign trade.

There is another balance, indeed, which has
already been explained, very different from the
balance of trade, and which, according as it hap
pens to be either favourable or unfavourable,
necessarily occasions the prosperity or decay of
every nation. This is the balance of the annual
produce and consumption. If the exchangeable
value of the annual produce, it has already been
observed, exceeds that of the annual consump
tion, the capital of the society must annually
increase in proportion to this excess. The so
ciety in this case lives within its revenue, and
what is annually saved out of its revenue, is na
turally added to its capital, and employed so as
to increase still further the annual produce. If
the exchangeable value of the annual produce,
on the contrary, fall short of the annual con
sumption, the capital of the society must an-

CHAP. III. THE WEALTH OF NATIONS.

nually decay in proportion to this deficiency.
The expense of the society in this case exceeds
its revenue, and necessarily encroaches upon its
capital. Its capital, therefore, must necessarily
decay, and, together with it, the exchangeable
value of the annual produce of its industry.

This balance of produce and consumption is
entirely different from, what is called, the ba
lance of trade. It might take place in a nation
which had no foreign trade, but which was en
tirely separated from all the world. It may take
place in the whole globe of the earth, of which
the wealth, population, and improvement may
be either gradually increasing or gradually de
caying.

The balance of produce and consumption
may be constantly in favour of a nation, though
what is called the balance of trade be generally
against it. A nation may import to a greater
value than it exports for half a century, perhaps,
together ; the gold and silver which comes into
it during all this time may be all immediately
sent out of it ; its circulating coin may gradually
decay, different sorts of paper money being sub
stituted in its place, and even the debts too which
it contracts in the principal nations with whom
it deals, may be gradually increasing ; and yet
its real wealth, the exchangeable value of the
annual produce of its lands and labour, may,
during the same period, have been increasing in
a much greater proportion. The state of our
North American colonies, and of the trade
which they carried on with Great Britain, before

252 THE NATURE AND CAUSES OF BOOK IV.

the commencement of the present disturbances*,
may serve as a proof that this is by no means
an impossible supposition.

CHAPTER IV.

Of Drawbacks.

MERCHANTS and manufacturers are not con
tented with the monopoly of the home market,
but desire likewise the most extensive foreign
sale for their goods. Their country has no ju
risdiction in foreign nations, and therefore can
seldom procure them any monopoly there. They
are generally obliged, therefore, to content them
selves with petitioning for certain encourage
ments to exportation.

Of these encouragements what are called
drawbacks seem to be the most reasonable. To
allow the merchant to drawback upon exporta
tion, either the whole or a part of whatever ex
cise or inland duty is imposed upon domestic in
dustry, can never occasion the exportation of a
greater quantity of goods than what would have
been exported had no duty been imposed. Such
encouragements do not tend to turn towards any
particular employment a greater share of the ca
pital of the country, than what would go to that
employment of its own accord, but only to
hinder the duty from driving away any part of

* This paragraph was written in the year 1775.

CHAP. IV. THE WEALTH OF NATIONS. 253

that share to other employments. They tend
not to overturn that balance which naturally
establishes itself among all the various employ
ments of the society; but to hinder it from being
overturned by the duty. They tend not to de
stroy, but to preserve, what it is in most cases
advantageous to preserve, the natural division
and distribution of labour in the society.

The same thing may be said of the draw
backs upon the re-exportation of foreign goods
imported; which in Great Britain generally
amount to by much the largest part of the duty
upon importation. By the second of the rules,
annexed to the act of parliament, which im
posed, what is now called, the old subsidy, every
merchant, whether English or alien, was allowed
to draw back half that duty upon exportation ;
the English merchant, provided the exportation
took place within twelve months ; the alien, pro
vided it took place within nine months. Wines,
currants, and wrought silks were the only goods
which did not fall within this rule, having other
and more advantageous allowances. The duties
imposed by this act of parliament were, at that
time, the only duties upon the importation of
foreign goods. The term within which this,
and all other drawbacks, could be claimed, was
afterwards (by 7 Geo. I. chap. 21. sect. 10.) ex
tended to three years.

The duties which have been imposed since
the old subsidy, are, the greater part of them,
wholly drawn back upon exportation. This ge
neral rule, however, is liable to a great number

THE NATURE AND CAUSES OF BOOK IV.

of exceptions, and the doctrine of drawbacks has
become a much less simple matter, than it was
at their first institution.

Upon the exportation of some foreign goods,
of which it was expected that the importation
would greatly exceed what was necessary for the
home consumption, the whole duties are drawn
back, without retaining even half the old sub
sidy. Before the revolt of our North American
colonies, we had the monopoly of the tobacco
of Maryland and Virginia. We imported about
ninety-six thousand hogsheads, and the home
consumption was not supposed to exceed four
teen thousand. To facilitate the great exporta
tion which was necessary, in order to rid us of
the rest, the whole duties were drawn back,
provided the exportation took place within three
years.

We still have, though not altogether, yet very
nearly, the monopoly of the sugars of our West
Indian islands. If sugars are exported within a
year, therefore, all the duties upon importation
are drawn back, and if exported within three
years, all the duties, except half the old subsidy,
which still continues to be retained upon the ex
portation of the greater part of goods. Though
the importation of sugar exceeds, a good deal,
what is necessary for the home consumption,
the excess is inconsiderable, in comparison of
what it used to be in tobacco.

Some goods, the particular objects of the jea
lousy of our own manufacturers, are prohibited
to be imported for home consumption. They

CHAP. IV. THE WEALTH OF NATIONS. 255

may, however, upon paying certain duties, be
imported and warehoused for exportation. But
upon sucli exportation, no part of these duties
is drawn back. Our manufacturers are unwil
ling, it seems, that even this restricted importa
tion should be encouraged, and are afraid lest
some part of these goods should be stolen out
of the warehouse, and thus come into competi
tion with their own. It is under these regula
tions only that we can import wrought silks,
French cambrics and lawns, calicoes painted,
printed, stained, or dyed, &c.

We are unwilling even to be the carriers of
French goods, and choose rather to forego a pro
fit to ourselves, than to suffer those, whom we
consider as our enemies, to make any profit by
our means. Not only half the old subsidy, but
the second twenty-five per cent, is retained upon
the exportation of all French goods.

By the fourth of the rules annexed to the old
subsidy, the drawback allowed upon the exporta
tion of all wines amounted to a great deal more
than half the duties which were, at that time,
paid upon their importation; and it seems, at
that time, to have been the object of the legis
lature to give somewhat more than ordinary en
couragement to the carrying trade in wine. Se
veral of the other duties too, which were im
posed, either at the same time, or subsequent to
the old subsidy; what is called the additional
duty, the new subsidy, the one-third and two-
thirds subsidies, the impost 1692, the tonnage
on wine, were allowed to be wholly drawn back

256 THE NATURE AND CAUSES OF BOOK IV.

upon exportation. All those duties, however,
except the additional duty and impost 1692,
being paid down in ready money, upon importa
tion, the interest of so large a sum occasioned
an expense, which made it unreasonable to ex
pect any profitable carrying trade in this article.
Only a part, therefore, of the duty called the
impost on wine, and no part of the twenty-five
pounds the ton upon French wines, or of the
duties imposed in 174.5, in 1763, and in 1778,
were allowed to be drawn back upon exporta
tion. The two imposts of five per cent, im
posed in 1779 and 1781, upon all the former
duties of customs, being allowed to be wholly
drawn back upon the exportation of all other
goods, were likewise allowed to be drawn back
upon that of wine. The last duty that has been
particularly imposed upon wine, that of 1780,
is allowed to be wholly drawn back, an in
dulgence, which, when so many heavy duties are
retained, most probably could never occasion
the exportation of a single ton of wine. These
rules take place with regard to all places of law
ful exportation, except the British colonies in
America.

The 15th Charles II. chap. 7. called an act
for the encouragement of trade, had given Great
Britain the monopoly of supplying the colonies
with all the commodities of the growth or ma
nufacture of Europe; and consequently with
wines. In a country of so extensive a coast as
our North American and West Indian colo
nies, where our authority was always so very

CHAP. IV. THE WEALTH OF NATIONS. 257

slender, and where the inhabitants were allowed
to carry out, in their own ships, their non-enu
merated commodities, at first, to all parts of
Europe, and afterwards, to all parts of Europe
south of Cape Finisterre, it is not very proba
ble that this monopoly could ever be much re
spected ; and they, probably, at all times, found
means of bringing back some cargo from the
countries to which they were allowed to carry
out one. They seem, however, to have found
some difficulty in importing European wines
from the places of their growth, and they could
not well import them from Great Britain, where
they were loaded with many heavy duties, of
which a considerable part was not drawn back
upon exportation. Madeira wine, not being an
European commodity, could be imported di
rectly into America and the West Indies ; coun
tries which, in all their non-enumerated com
modities, enjoyed a/ree trade to the*island of
Madeira. These circumstances had probably
introduced that general taste for Madeira wine,
which our officers found established in all our
colonies at the commencement of the war which
began in 1?«55, and which they brought back
with them to the mother country, where that
wine had not been much in fashion before.
Upon the conclusion of that war, in 1763 (by
the 4th Geo. III. Chap. 15. Sect. 12.) all the
duties, except 31. 10s. were allowed to be drawn
back, upon the exportation to the colonies, of
all wines, except French wines, to the commerce
and consumption of which, national prejudice

VOL. II. S

258 THE NATURE AND CAUSES OF BOOK IV.

would allow no sort of encouragement. The
period between the granting of this indulgence
and the revolt of our North American colonies,
was probably too short to admit of any consider
able change in the customs of those countries.

The same act, which, in the drawback upon
all wines except French wines, thus favoured
the colonies so much more than other countries;
in those, upon the greater part of other com
modities, favoured them much less. Upon the
exportation of the greater part of commodities
to other countries, half the old subsidy was
drawn back. But this law enacted, that no part
of that duty should be drawn back upon the ex
portation to the colonies of any commodities of
the growth or manufacture either of Europe or
the East Indies, except wines, white calicoes,
and muslins.

Drawbacks were, perhaps, originally granted
for the encouragement of the carrying trade ;
which, as the freight of the ships is frequently
paid by foreigners in money, was supposed to be
peculiarly fitted for bringing gold and silver into
the country. But though the carrying trade
certainly deserves no peculiar encouragement,
though the motive of the institution was, per-
haps, abundantly foolish, the institution itself
seems reasonable enough. Such drawbacks can
not force into this trade a greater share of the
capital of the country than what would have
gone to it of its own accord, had there been no
duties upon importation. They only prevent
its being excluded altogether by those duties.

CHAP. IV. THE WEALTH OF NATIONS. 259

The carrying trade, though it deserves no pre
ference, ought not to be precluded, but to be
left free like all other trades. It is a necessary
resource to those capitals which cannot find em
ployment either in the agriculture or in the ma
nufactures of the country, either in its home
trade, or in its foreign trade of consumption.

The revenue of the customs, instead of suffer
ing, profits from such drawbacks, by that part
of the duty which is retained. If the whole
duties had been retained, the foreign goods,
upon which they are paid, could seldom have
been exported, nor consequently imported, for
want of a market. The duties, therefore, of
which a part is retained, would never have been
paid.

These reasons seem sufficiently to justify
drawbacks, and would justify them, though the
whole duties, whether upon the produce of do
mestic industry, or upon foreign goods, were
always drawn back upon exportation. The re
venue of excise would in this case, indeed,
suffer a little, and that of the customs a good
deal more ; but the natural balance of industry,
the natural division and distribution of labour,
which is always more or less disturbed by such
duties, would be more nearly re-established by
such a regulation.

These reasons, however, will justify draw
backs only upon exporting goods to those coun
tries which are altogether foreign and inde
pendent, not to those in which our merchants
and manufacturers enjoy a monopoly. A draw-

s 2

260 THE NATURE AND CAUSES OF BOOK iv.

back, for example, upon the exportation of Eu
ropean goods to our American colonies, will not
always occasion a greater exportation than what
would have taken place without it. By means
of the monopoly which our merchants and ma
nufacturers enjoy there, the same quantity might
frequently, perhaps, be sent thither, though the
whole duties were retained. The drawback,
therefore, may frequently be pure loss to the
revenue of excise and customs, without altering
the state of the trade, or rendering it in any re
spect more extensive. How far such drawbacks
can be justified, as a proper encouragement to
the industry of our colonies, or how far it is
advantageous to the mother- country, that they
should be exempted from taxes which are paid
by all the rest of their fellow-subjects, will ap
pear hereafter, when I come to treat of colonies.
Drawbacks, however, it must always be un
derstood, are useful only in those cases in which
the goods for the exportation of which they are
given are really exported to some foreign coun
try ; and not clandestinely re-imported into our
own. That some drawbacks, particularly those
upon tobacco, have frequently been abused in
this manner, and have given occasion to many
frauds equally hurtful both to the revenue and
to the fair trader, is well known.

CHAP. v. THE WEALTH OF NATIONS. 261

CHAPTER V.

Of Bounties.

BOUNTIES upon exportation are, in Great
Britain, frequently petitioned for, and some
times granted to the produce of particular
branches of domestic industry. By means of
them our merchants and manufacturers, it is
pretended, will be enabled to sell their goods as
cheap or cheaper than their rivals in the foreign
market. A greater quantity, it is said, will
thus be exported, and the balance of trade con
sequently turned more in favour of our own
country. We cannot give our workmen a mo
nopoly in the foreign, as we have done in the
home market. We cannot force foreigners to
buy their goods, as we have done our own coun
trymen. The next best expedient, it has been
thought, therefore, is to pay them for buying.
It is in this manner that the mercantile system
proposes to enrich the whole country, and to
put money into all our pockets by means of the
balance of trade.

Bounties, it is allowed, ought to be given to
those branches of trade only which cannot be
carried on without them. But every branch of
trade in which the merchant can sell his goods
for a price which replaces to him, with the ordi
nary profits of stock, the whole capital employed
in preparing and sending them to market, can be

THE NATURE AND CAUSES OF BOOK IV-

carried on without a bounty. Every such branch
is evidently upon a level with all the other
branches of trade which are carried on without
bounties, and cannot therefore require one more
than they. Those trades only require bounties
in which the merchant is obliged to sell his
goods for a price which does not replace to him
his capital, together with the ordinary profit;
or in which he is obliged to sell them for les^
than it really costs him to send them to market.
The bounty is given in order to make up this
loss, and to encourage him to continue, or per
haps to begin, a trade of which the expense is
supposed to be greater than the returns, of
which every operation eats up a part of the ca
pital employed in it, and which is of such a na
ture, that, if all other trades resembled it, there
would soon be no capital left in the country.

The trades, it is to be observed, which are
carried on by means of bounties, are the only
ones which can be carried on between two na
tions for any considerable time together, in such
a manner as that one of them shall always and
regularly lose, or sell its goods for less than it
realJy costs to send them to market. But if the
bounty did not repay to the merchant what he
would otherwise lose upon the price of his goods,
his own interest would soon oblige him to em
ploy his stock in another way, or to find out a
trade in which the price of the goods would re
place to him, with the ordinary profit, the capi
tal employed in sending them to market. The
effect of bounties, like that of all the other ex-

CHAP. V. THE WEALTH OF NATIONS. 263

pedients of the mercantile system, can only be
to force the trade of a country into a channel
much less advantageous than that in which it
would naturally run of its own accord.

The ingenious and well-informed author of
the tracts upon the corn trade has shown very
clearly, that since the bounty upon the exporta
tion of corn was first established, the price of the
corn exported, valued moderately enough, has
exceeded that of the corn imported, valued very
high, by a much greater sum than the amount
of the whole bounties which have been paid dur
ing that period. This, he imagines, upon the
true principles of the mercantile system, is a
clear proof that this forced corn trade is bene
ficial to the nation ; the value of the exportation
exceeding that of the importation by a much
greater sum than the whole extraordinary ex
pense which the public has been at in order to
get it exported. He does not consider that this
extraordinary expense, or the bounty, is the
smallest part of the expense which the exporta
tion of corn really costs the society. The ca
pital which the farmer employed in raising it,
must likewise be taken into the account. Un
less the price of the corn when sold in the fo
reign markets replaces, not only the bounty, but
this capital, together with the ordinary profits
of stock, the society is a loser by the difference,
or the national stock is so much diminished.
But the very reason for which it has been
thought necessary to grant a bounty, is the
supposed insufficiency of the price to do this.

^64 THE NATURE AND CAUSES OF BOOK IV.

The average price of corn, it has been said,
has fallen considerably since the establishment
of the bounty. That the average price of corn
began to fall somewhat towards the end of the
last century, and has continued to do so during
the course of the sixty-four first years of the
present, 1 have already endeavoured to show.
But this event, supposing it to be real, as I be
lieve it to be, must have happened in spite of
the bounty, and cannot possibly have happened
in consequence of it. It has happened in France,
as well as in England, though in France there
was, not only no bounty, but, till 1764, the ex
portation of corn was subjected to a general
prohibition; This gradual fall in the average
price of grain, it is probable, therefore, is ulti
mately owing neither to the one regulation nor
to the other, but to that gradual and insensible
rise in the real value of silver, which, in the
first book of this discourse, I have endeavoured
to show has taken place in the general market
of Europe, during the course of the present
century. It seems to be altogether impossible
that the bounty could ever contribute to lower
the price of grain.

In years of plenty, it has already been ob
served, the bounty, by occasioning an extraor
dinary exportation, necessarily keeps up the price
of corn in the home market above what it would
naturally fall to. To do so was the avowed
purpose of the institution. In years of scarcity,
though the bounty is frequently suspended, yet
the great exportation which it occasions in years

I:HAP. v. THE WEALTH OF NATIONS. 265

of plenty, must frequently hinder more or less
the plenty of one year from relieving the scarcity
of another. Both in years of plenty, and in
years of scarcity, therefore, the bounty necessa
rily tends to raise the money price of corn some
what higher than it otherwise would be in the
home market.

That, in the actual state of tillage, the bounty
must necessarily have this tendency, will not, I
apprehend, be disputed by any reasonable per
son. But it has been thought by many people
that it tends to encourage tillage, and that in
two different ways ; first, by opening a more
extensive foreign market to the corn of the
farmer, it tends, they imagine, to increase the
demand or, and consequently the production of,
that commodity ; and secondly, by securing to
him a better price than he could otherwise ex
pect in the actual state of tillage, it tends, they
suppose, to encourage tillage. This double encou
ragement must, they imagine, in a long period
of years, occasion such an increase in the pro
duction of corn, as may lower its price in the
home market, much more than the bounty can
raise it, in the actual state which tillage may, at
the end of that period, happen to be in.

I answer, that whatever extension of the fo
reign market can be occasioned by the bounty,
must, in every particular year, be altogether at
the expense of the home market; as every bushel
of corn which is exported bymeansof the bounty,
and which would not have been exported with
out the bountv, would have remained in the

266 THE NATURE AND CAUSES OF BOOK IV.

home market to increase the consumption, and
to lower the price of that commodity. The
corn bounty, it is to be observed, as well as
every other bounty upon exportation, imposes
two different taxes upon the people ; first, the
tax which they are obliged to contribute, in order
to pay the bounty ; and secondly, the tax which
arises from the advanced price of the commo
dity in the home market, and which, as the
whole body of the people are purchasers of corn,
must, in this particular commodity, be paid by
the whole body of the people. In this parti
cular commodity, therefore, this second tax is
by much the heaviest of the two. Let us sup
pose that, taking one year with another, the
bounty of five shillings upon the exportation of
the quarter of wheat, raises the price of that
commodity in the home market only sixpence
the bushel, or four shillings the quarter, higher
than it otherwise would have been in the actual
state of the crop. Even upon this very mode
rate supposition, the great body of the people,
over and above contributing the tax which pays
the bounty of five shillings upon every quarter
of wheat exported, must pay another of four
shillings upon every quarter which they them
selves consume. But, according to the very well-
informed author of the tracts upon the corn-
trade, the average proportion of the corn ex
ported to that consumed at home, is not more
than that of one to thirty-one. For every five
shillings, therefore, which they contribute to the
payment of the first tax, they must contribute six

CHAP. v. THE WEALTH OF NATIONS. 267

pounds four shillings to the payment of the
second. So very heavy a tax upon the first ne
cessary of life, must either reduce the subsistence
of the labouring poor, or it must occasion some
augmentation in their pecuniary wages, propor
tionable to that in the pecuniary price of their
subsistence. So far as it operates in the one
way, it must reduce the ability of the labouring
poor to educate and bring up their children, and
must, so far, tend to restrain the population of
the country. So far as it operates in the other,
it must reduce the ability of the employers of
the poor, to employ so great a number as they
otherwise might do, and must, so far, tend to
restrain the industry of the country. The ex
traordinary exportation of corn, therefore, oc
casioned by the bounty, not only, in every par
ticular year diminishes the home, just as much
as it extends the foreign market and consump
tion, but, by restraining the population and in
dustry of the country, its final tendency is to
stint and restrain the gradual extension of the
home market; and thereby, in the long run,
rather to diminish, than to augment, the whole
market and consumption of corn.

This enhancement of the money price of
corn, however, it has been thought, by render
ing that commodity more profitable to the farmer,
must necessarily encourage its production.

I answer, that this might be the case if the
effect of the bounty was to raise the real price
of corn, or to enable the farmer, with an equal
quantity of it, to maintain a greater number

268 THE NATURE AND CAUSES OF BOOK IV.

of labourers in the same manner, whether liberal,
moderate, or scanty, that other labourers are
commonly maintained in his neighbourhood.
But neither the bounty, it is evident, nor any
other human institution, can have any such
effect. It is not the real, but the nominal price
of corn, which can in any considerable degree
be affected by the bounty. And though the tax
which that institution imposes upon the whole
body of the people, may be very burdensome to
those who pay it, it is of very little advantage
to those who receive it.

The real effect of the bounty is not so much
to raise the real value of corn, as to degrade the
real value of silver ; or to make an equal quan
tity of it exchange for a smaller quantity, not
only of corn, but of all other home-made com
modities : for the money price of corn regulates
that of all other home-made commodities.

It regulates the money price of labour, which
must always be such as to enable the labourer
to purchase a quantity of corn sufficient to
maintain him and his family either in the liberal,
moderate, or scanty manner in which the ad
vancing, stationary, or declining circumstances
of the society oblige his employers to maintain
him.

It regulates the money price of all the other
parts of the rude produce of land, which, in
every period of improvement, must bear a cer
tain proportion to that of corn, though this
proportion is different in different periods. It
regulates, for example, the money price of grass

CHAP. v. THE WEALTH OF NATIONS. 269

and hay, of butchers'-meat, of horses, and the
maintenance of horses, of land carriage conse
quently, or of the greater part of the inland com
merce of the country.

By regulating the money price of all the other
parts of the rude produce of land, it regulates
that of the materials of almost all manufactures.
By regulating the money price of labour, it re
gulates that of manufacturing art and industry.
And by regulating both, it regulates that of the
complete manufacture. The money price of
labour, and of every thing that is the produce
either of land or labour, must necessarily either
rise or fall in proportion to the money price of
corn.

Though in consequence of the bounty, there
fore, the farmer should be enabled to sell his corn
for four shillings the bushel instead of three and
sixpence, and to pay his landlord a money rent
proportionable to this rise in the money price of
his produce; yet, if in consequence of this rise
in the price of corn, four shillings will purchase
no more home-made goods of any other kind
than three and sixpence would have done before,
neither the circumstances of the farmer, nor those
of the landlord, will be much mended by this
change. The farmer will not be able to culti
vate much better : the landlord will not be able
to live much better. In the purchase of foreign
commodities this enhancement in the price of
corn may give them some little advantage. In
that of home-made commodities it can give them
none at all, And almost the whole expense of

270 THE NATURE AND CAUSES OF BOOK IT-

the farmer, and the far greater part even of that
of the landlord, is in home-made commodities.

That degradation in the value of silver which
is the effect of the fertility of the mines, and
which operates equally, or very near equally,
through the greater part of the commercial world,
is a matter of very little consequence to any par
ticular country. The consequent rise of all money
prices, though it does not make those who re
ceive them really richer, does not make them
really poorer. A service of plate becomes really
cheaper, and every thing else remains precisely
of the same real value as before.

But that degradation in the value of silver
which, being the effect either of the peculiar
situation, or of the political institutions of a par
ticular country, takes place only in that country,
is a matter of very great consequence, which,
far from tending to make any body really richer,
tends to make every body really poorer. The
rise in the money price of all commodities, which
is in this case peculiar to that country, tends to
discourage more or less every sort of industry
which is carried on within it, and to enable fo
reign nations, by furnishing almost all sorts of
goods for a smaller quantity of silver than its own
workmen can afford to do, to undersell them,
not only in the foreign, but even in the home
market.

It is the peculiar situation of Spain and Por
tugal as proprietors of the mines, to be the
distributors of gold and silver to all the other
countries of Europe. Those metals ought na-

CHAP. V. THE WEALTH OF NATIONS. 271

turally, therefore, to be somewhat cheaper in
Spain and Portugal than in any other part of
Europe. The difference, however, should be
no more than the amount of the freight and in
surance ; and, on account of the great value and
small bulk of those metals, their freight is no
great matter, and their insurance is the same as
that of any other goods of equal value. Spain
and Portugal, therefore, could suffer very little
from their peculiar situation, if they did not
aggravate its disadvantages by their political
institutions.

Spain by taxing, and Portugal by prohibiting,
the exportation of gold and silver, load that ex
portation with the expense of smuggling, and
raise the value of those metals in other countries
so much more above what it is in their own, by
the whole amount of this expense. When you
dam up a stream of water, as soon as the dam
is full, as much water must run over the dam-
head as if there was no dam at all. The pro
hibition of exportation cannot detain a greater
quantity of gold and silver in Spain and Portu
gal than what they can afford to employ, than
what the annual produce of their land and
labour will allow them to employ, in coin,
plate, gilding, and other ornaments of gold and
silver. When they have got this quantity the
dam is full, and the whole stream which flows
in afterwards must run over. The annual ex
portation of gold and silver from Spain and
Portugal accordingly is, by all accounts, not
withstanding these restraints, very near equal to

THE NATURE AND CAUSES OF BOOK iv.

the whole annual importation. As the water,
however, must always be deeper behind the
dam-head than before it, so the quantity of gold
and silver which these restraints detain in Spain
and Portugal must, in proportion to the annual
produce of their land and labour, be greater
than what is to be found in other countries.
The higher and stronger the dam-head, the
greater must be the difference in the depth of
water behind and before it. The higher the tax,
the higher the penalties with which the pro
hibition is guarded, the more vigilant and severe
the police which looks after the execution of the
law, the greater must be the difference in the
proportion of gold and silver to the annual pro
duce of the land and labour of Spain and Portu
gal, and to that of other countries. It is said
accordingly to be very considerable, and that
you frequently find there a profusion of plate in
houses, where there is nothing else which would,
in other countries, be thought suitable or cor
respondent to this sort of magnificence. The
cheapness of gold and silver, or what is the same
thing, the dearness of all commodities, which is
the necessary effect of this redundancy of the
precious metals, discourages both the agriculture
and manufactures of Spain and Portugal, and
enables foreign nations to supply them with many
sorts of rude, and with almost all sorts of manu
factured produce, for a smaller quantity of gold
and silver than what they themselves can either
raise or make them for at home. The tax and
prohibition operate in two different ways. They

CHAP. V. TPIE WEALTH OF NATIONS. 273

not only lower very much the value of the
precious metals in Spain and Portugal, but by
detaining there a certain quantity of those metals
which would otherwise flow over other countries,
they keep up their value in those other countries
somewhat above what it otherwise would be,
and thereby give those countries a double ad
vantage in their commerce with Spain and Por
tugal. Open the flood-gates, and there will
presently be less water above, and more below,
the dam-head, and it will soon come to a level in
both places. Remove the tax and the prohi
bition, and as the quantity of gold and silver
will diminish considerably in Spain and Portugal,
so it will increase somewhat in other countries,
and the value of those metals, their proportion
to the annual produce of land and labour, will
soon come to a level, or very near to a level, in
all. The loss which Spain and Portugal could
sustain by this exportation of their gold and silver
would be altogether nominal and imaginary.
The nominal value of their goods, and of the
annual produce of their land and labour, would
fall, and would be expressed or represented by a
smaller quantity of silver than before: but their
real value would be the same as before, and
would be sufficient to maintain, command, and
employ, the same quantity of labour. As the
nominal value of their goods would fall, the real
value of what remained of their gold and silver
would rise, and a smaller quantity of those
metals would answer all the same purposes of
commerce and circulation which had employed

VOL. II. T

274 THE NATURE AND CAUSES OF BOOK IV.

a greater quantity before. The gold and silver
which would go abroad would not go abroad for
nothing, but would bring back an equal value
of goods of some kind or another. Those goods
too would not be all matters of mere luxury and
expense, to be consumed by idle people who
produce nothing in return for their consumption.
As the real wealth and revenue of idle people
would not be augmented by this extraordinary
exportation of gold and silver, so neither would
their consumption be much augmented by it.
Those goods would, probably, the greater part
of them, and certainly some part of them, con
sist in materials, tools, and provisions, for the
employment and maintenance of industrious
people, who would reproduce, with a profit, the
full value of their consumption. A part of the
dead stock of the society would thus be turned
into active stock, and would put into motion a
greater quantity of industry than had been em
ployed before. The annual produce of their
land and labour would immediately be aug
mented a little, and in a few years would, pro
bably, be augmented a great deal ; their industry
being thus relieved from one of the most op
pressive burdens which it at present labours
under.

The bounty upon the exportation of corn
necessarily operates exactly in the same way as
this absurd policy of Spain and Portugal. "What
ever be the actual state of tillage, it renders our
corn somewhat dearer in the home market than
it otherwise would be in that state, and some-

CHAP. V. THE WEALTH OF NATIONS. 275

what cheaper in the foreign ; and as the average
money price of corn regulates more or less that
of all other commodities, it lowers the value of
silver considerably in the one, and tends to raise
it a little in the other. It enables foreigners,
the Dutch in particular, not only to eat our corn
cheaper than they otherwise could do, but some
times to eat it cheaper than even our own people
can do upon the same occasions; as we are
assured by an excellent authority, that of Sir
Matthew Decker. It hinders our own work
men from furnishing their goods for so small a
quantity of silver as they otherwise might do;
and enables the Dutch to furnish theirs for a
smaller. It tends to render our manufactures
somewhat dearer in every market, and theirs
somewhat cheaper than they otherwise would
be, and consequently to give their industry a
double advantage over our own.

The bounty, as it raises in the home market,
not so much the real, as the nominal price of our
corn, as it augments, not the quantity of labour
which a certain quantity of corn can maintain
and employ, but only the quantity of silver
which it will exchange for, it discourages our
manufactures, without rendering any consider
able service either to our farmers or country
gentlemen. It puts, indeed, a little more
money into the pockets of both, and it will
perhaps be somewhat difficult to persuade the
greater part of them that this is not rendering
them a very considerable service. But if this
money sinks in its value, in the quantity of la-

T 2

276 THE NATURE AND CAUSES OF BOOK IV.

bonr, provisions, and home-made commodities of
all different kinds which it is capable of purchas
ing, as much as it rises in its quantity, the service
will be little more than nominal and imaginary.

There is, perhaps, but one set of men in the
whole commonwealth to whom the bounty either
was or could be essentially serviceable. These
were the corn merchants, the exporters and im
porters of corn. In years of plenty the bounty
necessarily occasioned a greater exportation than
would otherwise have taken place; and by hin
dering the plenty of the one year from relieving
the ^scarcity of another, it occasioned in years of
scarcity a greater importation than would other
wise have been necessary. It increased the busi
ness of the corn merchant in both ; and in years
of scarcity, it not only enabled him to import a
greater quantity, but to sell it for a better price,
and consequently with a greater profit than he
could otherwise have made, if the plenty of one
year had not been more or less hindered from
relieving the scarcity of another. It is in this
set of men, accordingly, that I have observed the
greatest zeal for the continuance or renewal of
the bounty.

Our country gentlemen, when they imposed
the high duties upon the importation of foreign
corn, which in times of moderate plenty amount
to a prohibition, and when they established the
bounty, seemed to have imitated the conduct of
our manufacturers. By the one institution, they
secured to themselves the monopoly of the home
market j and by the other, they endeavoured

CHAP. V. THE WEALTH OF NATIONS. 277

to prevent that market from ever being over
stocked with their commodity. By both they
endeavoured to raise its real value, in the same
manner as our manufacturers had, by the like
institutions, raised the real value of many (dif
ferent sorts of manufactured goods. They did
not perhaps attend to the great and essential
difference which nature has established between
corn and almost every other sort of goods.
When, either by the monopoly of the home
market, or by a bounty upon exportation, you
enable our woollen or linen manufacturers to sell
their goods for somewhat a better price than they
otherwise could get for them, you raise, not only
the nominal, but the real price of those goods.
You render them equivalent to a greater quan
tity of labour and subsistence, you increase not
only the nominal, but the real profit, the real
wealth and revenue of those manufacturers, and
you enable them either to live better themselves,
or to employ a greater quantity of labour in
those particular manufactures. You really en
courage those manufactures, and direct towards
them a greater quantity of the industry of the
country, than what would probably go to them
of its own accord. But when by the like insti
tutions you raise the nominal or money price of
corn, you do "not raise its real value. You do
not increase the real wealth, the real revenue
either of our farmers or country gentlemen.
You do not encourage the growth of corn, be
cause you do not enable them to maintain and
•employ more labourers in raising it. The nature

278 THE NATURE AND CAUSES OF BOOK IV.

of things has stamped upon corn a real value,
which cannot be altered by merely altering its
money price. No bounty upon exportation, no
monopoly of the home market, can raise that
value. The freest competition cannot lower it.
Through the world in general that value is equal
to the quantity of labour which it can maintain,
and in every particular place it is equal to the
quantity of labour which it can maintain in the
way, whether liberal, moderate, or scanty, in
which labour is commonly maintained in that
place. Woollen or linen cloth are not the re
gulating commodities by which the real value of
all other commodities must be finally measured
and determined ; corn is. The real value of
every other commodity is finally measured and
determined by the proportion which its average
money price bears to the average money price
of corn. The real value of corn does not vary
with those variations in its average money price,
which sometimes occur from one century to an
other. It is the real value of silver which varies
with them.

Bounties upon the exportation of any home
made commodity are liable, first, to that general
objection which may be made to all the different
expedients of the mercantile system ; the ob
jection of forcing some part of the industry of the
country into a channel less advantageous than
that in which it would run of its own accord :
and, secondly, to the particular objection of
forcing it, not only into a channel that is less
advantageous, but into one that is actually dis-

CHAP. v. THE WEALTH OF NATIONS. 279

advantageous ; the trade which cannot be carried
on but by means of a bounty being necessarily a
losing trade. The bounty upon the exportation
of corn is liable to this further objection, that
it can in no respect promote the raising of that
particular commodity of which it was meant to
encourage the production. When our country
gentlemen, therefore, demanded the establish
ment of the bounty, though they acted in imi
tation of our merchants and manufacturers, they
did not act with that complete comprehension of
their own interest which commonly directs the
conduct of those two other orders of people.
They loaded the public revenue with a very
considerable expense ; they imposed a very heavy
tax upon the whole body of the people ; but they
did not, in any sensible degree, increase the real
value of their own commodity ; and by lowering
somewhat the real value of silver, they discou
raged, in some degree, the general industry of
the country, and, instead of advancing, retarded
more or less the improvement of their own lands,
which necessarily depends upon the general in
dustry of the country.

To encourage the production of any com
modity, a bounty upon production, one should
imagine, would have a more direct operation
than one upon exportation. It would, besides,
impose only one tax upon the people, that which
they must contribute in order to pay the bounty.
Instead of raising, it would tend to lower the
price of the commodity in the home market ;
and thereby, instead of imposing a second lax

280 THE NATURE AND CAUSES OF BOOK IV.

upon the people, it might, at least in part, re
pay them for what they had contributed to the
first. Bounties upon production, however, have
been very rarely granted. The prejudices esta
blished by the commercial system have taught
us to believe, that national wealth arises more
immediately from exportation than from pro
duction. It has been more favoured according
ly, as the more immediate means of bringing
money into the country. Bounties upon pro
duction, it has been said too, have been found
by experience more liable to frauds, than those
upon exportation. How far this is true, I know
not. That bounties upon exportation have been
abused to many fraudulent purposes, is very
well known. But it is not the interest of mer
chants and manufacturers, the great inventors
of all these expedients, that the home market
should be overstocked with their goods; an event
which a bounty upon production might some
times occasion. A bounty upon exportation, by
enabling them to send abroad their surplus part,
and to keep up the price of what remains in the
home market, effectually prevents this. Of all
the expedients of the mercantile system, accord
ingly, it is the one of which they are the fondest.
I have known the different undertakers of some
particular works agree privately among them
selves to give a bounty out of their own pockets
upon the exportation of a certain proportion of
the goods which they dealt in. This expedient
succeeded so well, that it more than doubled the
price of their goods in the home market, not-

CHAP. V. THE WEALTH OF NATIONS. 281

withstanding a very considerable increase in the
produce. The operation of the bounty upon
corn must have been wonderfully different, if it
has lowered the money price of that commodity.
Something like a bounty upon production,
however, has been granted upon some particular
occasions. The tonnage bounties given to the
white-herring and whale-fisheries may, perhaps,
be considered as somewhat of this nature. They
tend directly, it may be supposed, to render the
goods cheaper in the home market than they
otherwise would be. In other respects their
effects, it must be acknowledged, are the same
as those of bounties upon exportation. By means
of them a part of the capital of the country is
employed in bringing goods to market of which
the price does not repay the cost, together with
the ordinary profits of stock.

But though the tonnage bounties to those
fisheries do not contribute to the opulence of
the nation, it may, perhaps, be thought that
they contribute to its defence, by augmenting
the number of its sailors and shipping. This,
it may be alleged, may sometimes be done by
means of such bounties at a much smaller ex
pense, than by keeping up a great standing
navy, if I may use such an expression, in the
same way as a standing army.

Notwithstanding these favourable allegations,
however, the following considerations dispose me
to believe, that in granting at least one of these

bounties, the legislature has been very grossly

imposed upon.

THE NATURE AND CAUSES OF BOOK IV.

First, the herring buss bounty seems too large.

From the commencement of the winter fishing
1771 to the end of the winter fishing 1781, the
tonnage bounty upon the herring buss fishery has
been at thirty shillings the ton. During these
eleven years the whole number of barrels caught
by the herring buss fishery of Scotland amounted
to 378,347. The herrings caught and cured at
sea are called sea sticks. In order to render
them what are called merchantable herrings, it
is necessary to repack them with an additional
quantity of salt ; and in this case, it is reckoned,
that three barrels of sea sticks are usually re
packed into two barrels of merchantable her
rings. The number of barrels of merchantable
herrings, therefore, caught during these eleven
years will amount only, according to this account,
to 252,231^. During these eleven years the ton-
age bounties paid amounted to 155,403/. Us. or
to Ss. 2±d. upon every barrel of sea sticks, and
to IQs. o^d. upon every barrel of merchantable
herrings.

The salt with which these herrings are cured
is sometimes Scotch, and sometimes foreign, salt;
both which are delivered free of all excise duty
to the fish curers. The excise duty upon Scotch
salt is at present Is. 6d. that upon foreign salt
105. the bushel. A barrel of herrings is supposed
to require about one bushel and one-fourth of a
bushel foreign salt. Two bushels are the supposed
average of Scotch salt. If the herrings are en
tered for exportation, no part of this duty is paid
up ; if entered for home consumption, whether the

CHAP. v. THE WEALTH OF NATIONS. 283

herrings were cured with foreign or with Scotch
salt, only one shilling the barrel is paid up. It
was the old Scotch duty upon a bushel of salt,
the quantity which, at a low estimation, had been
supposed necessary for curing a barrel of herrings.
In Scotland, foreign salt is very little used for any
other purpose but the curing offish. But from
the 5th April 1771, to the 5th April 1782,
the quantity of foreign salt imported amounted
to 936,974 bushels, at eighty-four pounds the
bushel : the quantity of Scotch salt delivered
from the works to the fish-curers, to no more
than 168,226, at fifty-six pounds the bushel only.
It would appear, therefore, that it is principally
foreign salt that is used in the fisheries. Upon
every barrel of herrings exported there is, be
sides, a bounty of %s. Sd. and more than two-
thirds of the buss caught herrings are exported.
Put all these things together, and you will find
that during these eleven years, every barrel of
buss caught herrings, cured with Scotch salt,
when exported, has cost government 175. ll^d.
and when entered for home consumption 14s.
3%d. : and that every barrel cured with foreign
salt, when exported, has cost government I/. 7$.
5f^.; and when entered for home consumption,
17. 3s. 9^d. The price of a barrel of good mer
chantable herrings runs from seventeen and
eighteen to four and five-and-twenty shillings ;
about a guinea at an average *.

Secondly, the bounty to the white herring
fishery is a tonnage bounty ; and is proportioned

* See the accounts at the end of the volume.

284 THE NATURE AND CAUSES OF BOOK iv.

to the burden of the ship, not to her diligence
or success in the fishery ; and it has, I am afraid,
been too common for vessels to fit out for the
sole purpose of catching, not the fish, but the
bounty. In the year 1759, when the bounty was
at fifty shillings the ton, the whole buss fishery
of Scotland brought in only four barrels of sea
sticks. In that year each barrel of sea sticks cost
government in bounties alone 113/. 15s.; each
barrel of merchantable herrings 159/. 7s. 6d.

Thirdly, the mode of fishing for which this
tonnage bounty in the white herring fishery has
been given (by busses or decked vessels from
twenty to eighty tons burden), seems not so well
adapted to the situation of Scotland as to that of
Holland ; from the practice of which country it
appears to have been borrowed. Holland lies
at a great distance from the seas to which her
rings are known principally to resort ; and can,
therefore, carry on that fishery only in decked
vessels, which can carry water and provisions
sufficient for a voyage to a distant sea. But the
Hebrides, or western islands, the islands of Shet
land, and the northern and north-western coasts
of Scotland, the countries in whose neighbour
hood the herring fishery is principally carried on,
are every where intersected by arms of the sea,
which run up a considerable way into the land,
and which, in the language of the country, are
called sea-lochs. It is to these sea-lochs that
the herrings principally resort during the sea
sons in which they visit those seas ; for the visits
of this, and, I am assured, of many other sorts

CHAP. v. THE WEALTH OF NATIONS. 285

of fish, are not quite regular and constant. A
boat fishery, therefore, seems to be the mode of
fishing best adapted to the peculiar situation of
Scotland : the fishers carrying the herrings on
shore as fast as they are taken, to be either cured
or consumed fresh. But the great encouragement
which a bounty of thirty shillings the ton gives
to the buss fishery, is necessarily a discourage
ment to the boat fishery ; which having no such
bounty, cannot bring its cured fish to market
upon the same terms as the buss fishery. The boat
fishery, accordingly, which, before the establish
ment of the buss bounty was very considerable,
and is said to have employed a number of seamen,
not inferior to what the buss fishery employs at
present, is now gone almost entirely to decay.
Of the former extent, however, of this now
ruined and abandoned fishery, I must acknow
ledge, that I cannot pretend to speak with much
precision. As no bounty was paid upon the outfit
of the boat fishery, no account was taken of it
by the officers of the customs or salt duties.

Fourthly, in many parts of Scotland, during
certain seasons of the year, herrings make no
inconsiderable part of the food of the common
people. A bounty, which tended to lower their
price in the home market, might contribute a
good deal to the relief of a great number of our
fellow subjects, whose circumstances are by no
means affluent. But the herring buss bounty
contributes to no such good purpose. It has
ruined the boat fishery, which is, by far, the
best adapted for the supply of the home market,,

£86 THE NATURE AND CAUSES OF BOOK IV.

and the additional bounty of Qs. 8d. the barrel
upon exportation, carries the greater part, more
than two thirds, of the produce of the buss
fishery abroad. Between thirty and forty years
ago, before the establishment of the buss bounty,
sixteen shillings the barrel, I have been assured,
was the common price of white herrings. Be
tween ten and fifteen years ago, before the boat
fishery was entirely ruined, the price was said
to have run from seventeen to twenty shillings
the barrel. For these last five years, it has,
at an average, been at twenty-five shillings the
barrel. This high price, however, may have
been owing to the real scarcity of the herrings
upon the coast of Scotland. I must observe
too, that the cask or barrel, which is usually
sold with the herrings, and of which the price
is included in all the foregoing prices, has,
since the commencement of the American war,
risen to about double its former price, or from
about three shillings to about six shillings. I
must likewise observe, that the accounts I have
received of the prices of former times, have
been by no means quite uniform and con
sistent ; and an old man of great accuracy and
experience has assured me, that more than
fifty years ago, a guinea was the usual price
of a barrel of good merchantable herrings; and
this, I imagine, may still be looked upon as
the average price. All accounts, however, I
think, agree, that the price has not been lowered
in the home market, in consequence of the buss
bounty.

CHAP. v. THE WEALTH OF NATIONS. 287

When the undertakers of fisheries, after such
liberal bounties have been bestowed upon them,
continue to sell their commodity at the same, or
even at a higher price than they were accus
tomed to do before, it might be expected that
their profits should be very great ; and it is not
improbable that those of some individuals may
have been so. In general, however, I have
every reason to believe they have been quite
otherwise. The usual effect of such bounties is
to encourage rash undertakers to adventure in a
business which they do not understand, and what
they lose by their own negligence and ignorance,
more than compensates all that they can gain
by the utmost liberality of government. In
17<50, by the same act which first gave the
bounty of thirty shillings the ton for the en
couragement of the white herring fishery (the
23 Geo. II. chap. 24.) a joint stock company
was erected, with a capital of five hundred thou
sand pounds, to which the subscribers (over and
above all other encouragements, the tonnage
bounty just now mentioned, the exportation
bounty of two shillings and eight-pence the bar
rel, the delivery of both British and foreign salt
duty free) were, during the space of fourteen
years, for every hundred pounds which they
subscribed and paid into the stock of the so
ciety, entitled to three pounds a year, to be
paid by the receiver-general of the customs in
equal half-yearly payments. Besides this great
company, the residence of whose governor and
directors was to be in London, it was declared

288 THE NATURE AND CAUSES OF BOOK IV.

lawful to erect different fishing- chambers in all
the different out-ports of the kingdom, provided
a sum not less than ten thousand pounds was sub
scribed into the capital of each, to be managed
as its own risk, and for its own profit and loss.
The same annuity, and the same encourage
ments of all kinds, were given to the trade of
those inferior chambers, as to that of the great
company. The subscription of the great com
pany was soon filled up, and several different
fishing-chambers were erected in the different
out-ports of the kingdom. In spite of all these
encouragements, almost all those different com
panies, both great and small, lost either the
whole, or the greater part of their capitals;
scarce a vestige now remains of any of them,
and the white herring fishery is now entirely,
or almost entirely, carried on by private ad
venturers.

If any particular manufacture was necessary,
indeed, for the defence of the society, it might
not always be prudent to depend upon our
neighbours for the supply ; and if such manu
facture could not otherwise be supported at
home, it might not be unreasonable that all the
other branches of industry should be taxed in
order to support it. The bounties upon the
exportation of British-made sail-cloth, and Bri
tish-made gunpowder, may, perhaps, both be
vindicated upon this principle.

But though it can very seldom be reasonable
to tax the industry of the great body of the
people, in order to support that of some par-

CHAP. v. THE WEALTH OF NATIONS. 289

ticular class of manufactures ; yet in the wan
tonness of great prosperity, when the public
enjoys a greater revenue than it knows well
what to do with, to give such bounties to fa
vourite manufactures, may, perhaps, be as na
tural, as to incur any other idle expense. In
public, as well as in private expenses, great
wealth may, perhaps, frequently be admitted as
an apology for great folly. But there must
surely be something more than ordinary ab
surdity, in continuing such profusion in times
of general difficulty and distress.

What is called a bounty is sometimes no
more than a drawback, and consequently is not
liable to the same objections as what is properly
a bounty. The bounty, for example, upon re
fined sugar exported, may be considered as a
drawback of the duties upon the brown and
muscovado sugars, from which it is made. The
bounty upon wrought silk exported, a drawback
of the duties upon raw and thrown silk im
ported. The bounty upon gunpowder exported,
a drawback of the duties upon brimstone and
saltpetre imported. In the language of the
customs those allowances only are called draw
backs, which are given upon goods exported in
the same form in which they are imported.
When that form has been so altered by manu
facture of any kind, as to come under a new
denomination, they are called bounties.

Premiums given by the public to artists and
manufacturers who excel in their particular oc
cupations, are not liable to the same objections

VOL n. u

290 THE NATURE AND CAUSES OF BOOK IV.

as bounties. By encouraging extraordinary dex
terity and ingenuity, they serve to keep up the
emulation of the workmen actually employed in
those respective occupations, and are not con
siderable enough to turn towards any one of
them a greater share of the capital of the coun
try than what would go to it of its own accord.
Their tendency is not to overturn the natural
balance of employments, but to render the work
which is done in each as perfect and complete
as possible. The expense of premiums, besides,
is very trifling ; that of bounties very great.
The bounty upon corn alone has sometimes cost
the public in one year more than three hundred
thousand pounds.

Bounties are sometimes called premiums, as
drawbacks are sometimes called bounties. But
we must in all cases attend to the nature of the
thing without paying any regard to the word.

Digression concerning the Corn Trade and Corn
Laws.

I cannot conclude this chapter concerning
bounties, without observing that the praises
which have been bestowed upon the law which
establishes the bounty upon the exportation of
corn, and upon that system of regulations which
is connected with it, are altogether unmerited.
A particular examination of the nature of the
corn trade, and of the principal British laws
which relate to it, will sufficiently demonstrate

CHAP. V. THE WEALTH OF NATIONS.

the truth of this assertion. The great import
ance of this subject must justify the length of
the digression.

The trade of the corn merchant is composed
of four different branches, which, though they
may sometimes be all carried on by the same
person, are in their own nature four separate
and distinct trades. These are, first, the trade
of the inland dealer ; secondly, that of the mer
chant importer for home consumption ; thirdly,
that of the merchant exporter of home produce
for foreign consumption ; and fourthly, that of
the merchant carrier, or of the importer of corn
in order to export it again.

I. The interest of the inland dealer, and that
of the great body of the people, how opposite
soever they may at first sight appear, are, even in
years of the greatest scarcity, exactly the same.
It is his interest to raise the price of his corn as
high as the real scarcity of the season requires,
and it never can be his interest to raise it higher.
By raising the price he discourages the con
sumption, and puts everybody, more or less, but
particularly the inferior ranks of people, upon
thrift and good management. If, by raising it
too high, he discourages the consumption so
much that the supply of the season is likely to
go beyond the consumption of the season, and
to last for some time after the next crop begins
to come in, he runs the hazard, not only of
losing a considerable part of his corn by natural
causes, but of being obliged to sell what remains
of it for much less than what he might have had

292 THE NATURE AND CAUSES OF BOOK IV,

for it several months before. If, by not raising
the price high enough, he discourages the con
sumption so little that the supply of the season
is likely to fall short of the consumption of the
season, he not only loses a part of the profit
which he might otherwise have made, but he
exposes the people to suffer before the end of the
season, instead of the hardships of a dearth, the
dreadful horrors of a famine. It is the interest
of the people that their daily, weekly, and
monthly consumption, should be proportioned
as exactly as possible to the supply of the season.
The interest of the inland corn dealer is the
same. By supplying them, as nearly as he can
judge, in this proportion, he is likely to sell all
his corn for the highest price, and with the
greatest profit; and his knowledge of the state of
the crop, and of his daily, weekly, and monthly
sales, enables him to judge with more or less
accuracy, how far they really are supplied in this
manner. Without intending the interest of the
people, he is necessarily led, by a regard to his
own interest, to treat them, even in years of
scarcity, pretty much in the same manner as the
prudent master of a vessel is sometimes obliged
to treat his crew. When he foresees that pro
visions are likely to run short, he puts them
upon short allowance. Though from excess of
caution he should sometimes do this without any
real necessity, yet all the inconveniencies which
his crew can thereby suffer are inconsiderable, in
comparison of the danger, misery, and ruin, to
which they might sometimes be exposed by a less

CHAP. v. THE WEALTH OF NATIONS. 293

provident conduct. Though from excess of
avarice, in the same manner, the inland corn
merchant should sometimes raise the price of his
corn somewhat higher than the scarcity of the
season requires, yet all the inconveniencies which
the people can suffer from this conduct, which
effectually secures them from a famine in the end
of the season, are inconsiderable, in comparison
of what they might have been exposed to by a
more liberal way of dealing in the beginning of
it. The corn merchant himself is likely to suffer
the most by this excess of avarice; not only from
the indignation which it generally excites against
him, but, though he should escape the effects
of this indignation, from the quantity of corn
which it necessarily leaves upon his hands in the
end of the season, and which, if the next season
happens to prove favourable, he must always
sell for a much lower price than he might other
wise have had.

Were it possible, indeed, for one great com
pany of merchants to possess themselves of the
whole crop of an extensive country, it might,
perhaps, be their interest to deal with it as the
Dutch are said to do with the spiceries of the
Moluccas, to destroy or throw away a consider
able part of it, in order to keep up the price of
the rest. But it is scarce possible, even by the
violence of law, to establish such an extensive
monopoly with regard to corn ; and wherever
the law leaves the trade free, it is of all com
modities the least liable to be engrossed or mo
nopolized by the force of a few large capitals,

294 THE NATURE AND CAUSES OF BOOK IV.

which buy up the greater part of it. Not only
its value far exceeds what the capitals of a few
private men are capable of purchasing, but sup
posing they were capable of purchasing it, the
manner in which it is produced renders this
purchase altogether impracticable. As in every
civilized country it is the commodity of which
the annual consumption is the greatest, so a
greater quantity of industry is annually employed
in producing corn than in producing any other
commodity. When it first comes from the
ground too, it is necessarily divided among a
greater number of owners than any other com
modity ; and these owners can never be collected
into one place like a number of independent
manufacturers, but are necessarily scattered
through all the different corners of the country.
These first owners either immediately supply the
consumers in their own neighbourhood, or they
supply other inland dealers who supply those
consumers. The inland dealers in corn, there
fore, including both the farmer and the baker,
are necessarily more numerous than the dealers
in any other commodity, and their dispersed
situation renders it altogether impossible for them
to enter into any general combination. If in a
year of scarcity, therefore, any of them should
find that he had a good deal more corn upon
hand than, at the current price, he could hope
to dispose of before the end of the season, he
would never think of keeping up this price to
his own loss, and to the sole benefit of his rivals
and competitors, but would immediately lower

CHAP. V. THE WEALTH OF NATIONS.

it, in order to get rid of his corn before the new
crop began to come in. The same motives, the
same interests, which would thus regulate the
conduct of any one dealer, would regulate that of
every other, and oblige them all in general to sell
their corn at the price which, according to the
best of their judgment, was most suitable to the
scarcity or plenty of the season.

Whoever examines, with attention, the history
of the dearths and famines which have afflicted
any part of Europe, during either the course of
the present or that of the two preceding cen
turies, of several of which we have pretty exact
accounts, will find, I believe, that a dearth
never has arisen from any combination among
the inland dealers in corn, nor from any other
cause but a real scarcity, occasioned sometimes,
perhaps, and in some particular places, by the
waste of war, but in by far the greatest number
of cases, by the fault of the seasons ; and that a
famine has never arisen from any other cause
but the violence of government attempting, by
improper means, to remedy the inconveniencies
of a dearth.

In an extensive corn country, between all the
different parts of which there is a free commerce
and communication, the scarcity occasioned by
the most unfavourable seasons can never be so
great as to produce a famine ; and the scantiest
crop, if managed with frugality and ceconomy,
will maintain, through the year, the same num
ber of people that are commonly fed in a more
affluent manner by one of moderate plenty.

296 THE NATURE AND CAUSES OF BOOK iv.

The seasons most unfavourable to the crop are
those of excessive drought or excessive rain. But
as corn grows equally upon high and low lands,
upon grounds that are disposed to be too wet,
and upon those that are disposed to be too dry,
either the drought or the rain which is hurtful
to one part of the country is favourable to
another; and though both in the wet and in
the dry season the crop is a good deal less than
in one more properly tempered, yet in both
what is lost in one part of the country is in some
measure compensated by what is gained in the
other. In rice countries, where the crop not
only requires a very moist soil, but where in a
certain period of its growing it must be laid
under water, the effects of a drought are much
more dismal. Even in such countries, however,
the drought is, perhaps, scarce ever so universal,
as necessarily to occasion a famine, if the govern
ment would allow a free trade. The drought in
Bengal, a few years ago, might probably have
occasioned a very great dearth. Some improper
regulations, some injudicious restraints imposed
by the servants of the East India Company upon
the rice trade, contributed, perhaps, to turn that
dearth into a famine.

When the government, in order to remedy
the inconveniencies of a dearth, orders all the
dealers to sell their corn at what it supposes a
reasonable price, it either hinders them from
bringing it to market, which may sometimes
produce a famine even in the beginning of the
season j or if they bring it thither, it enables

CHAP. v. THE WEALTH OF NATIONS. 297

the people, and thereby encourages them to con
sume it so fast, as must necessarily produce a fa
mine before the end of the season. The unli
mited, unrestrained freedom of the corn trade,
as it is the only effectual preventive of the mi
series of a famine, so it is the best palliative
of the inconveniencies of a dearth ; for the in-
conveniencies of a real scarcity cannot be reme
died ; they can only be palliated. No trade de
serves more the full protection of the law, and no
trade requires it so much ; because no trade is
so much exposed to popular odium.

In years of scarcity the inferior ranks of peo
ple impute their distress to the avarice of the
corn merchant, who becomes the object of their
hatred and indignation. Instead of making pro
fit upon such occasions, therefore, he is often
in danger of being utterly ruined, and of having
his magazines plundered and destroyed by their
violence. It is in years of scarcity, however,
when prices are high, that the corn merchant
expects to make his principal profit. He is ge
nerally in contract with some farmers to furnish
him for a certain number of years with a certain
quantity of corn at a certain price. This con
tract price is settled according to what is sup
posed to be the moderate and reasonable, that is,
the ordinary or average price, which, before the
late years of scarcity, was commonly about eight-
and-twenty shillings for the quarter of wheat,
and for that of other grain in proportion. In
years of scarcity, therefore, the corn merchant
buys a great part of his corn for the ordinary

298 THE NATURE AND CAUSES OF BOOK iv.

price, and sells it for a much higher. That
this extraordinary profit, however, is no more
than sufficient to put his trade upon a fair level
with other trades, and to compensate the many
losses which he sustains upon other occasions,
both from the perishable nature of the commo
dity itself, and from the frequent and unforeseen
fluctuations of its price, seems evident enough,
from this single circumstance, that great fortunes
are seldom made in this as in any other trade.
The popular odium, however, which attends it
in years of scarcity, the only years in which it
can be very profitable, renders people of cha
racter and fortune averse to enter into it. It is
abandoned to an inferior set of dealers ; and
millers, bakers, mealmen, and meal factors, to
gether with a number of wretched hucksters, are
aknost the only middle people that, in the home
market, come between the grower and the con
sumer.

The ancient policy of Europe, instead of dis
countenancing this popular odium against a
trade so beneficial to the public, seems, on the
contrary, to have authorised and encouraged it.

By the 5th and 6th of Edward VI. cap. 14. it
was enacted, That whoever should buy any corn
or grain with intent to sell it again, should be
reputed an unlawful engrosser, and should, for
the first fault, suffer two months imprisonment,
and forfeit the value of the corn ; for the second,
suffer six months imprisonment, and forfeit
double the value ; and for the third, be set in
the pillory, suffer imprisonment during the king's

CHAP. V. THE WEALTH OF NATIONS. 299

pleasure, and forfeit all his goods and chattels.
The ancient policy of most other parts of Europe
was no better than that of England.

Our ancestors seem to have imagined that the
people would buy their corn cheaper of the far
mer than of the corn merchant, who, they were
afraid, would require, over and above the price
which he paid to the farmer, an exorbitant pro
fit to himself. They endeavoured, therefore, to
annihilate his trade altogether. They even en
deavoured to hinder as much as possible any
middle man of any kind from coming in be
tween the grower and the consumer; and this
was the meaning of the many restraints which
they imposed upon the trade of those whom they
called ladders or carriers of corn, a trade which
nobody was allowed to exercise without a licence
ascertaining his qualifications as a man of pro
bity and fair dealing. The authority of three
justices of the peace was, by the statute of Ed
ward VI. necessary, in order to grant this licence.
But even this restraint was afterwards thought
insufficient, and by a statute of Elizabeth, the
privilege of granting it was confined to the quar
ter-sessions.

The ancient policy of Europe endeavoured in
this manner to regulate agriculture, the great
trade of the country, by maxims quite different
from those which it established with regard to
manufactures, the great trade of the towns. By
leaving the farmer no other customers but either
the consumers or their immediate factors, the
kidders and carriers of corn, it endeavoured to

300 THE NATURE AND CAUSES OF BOOK IV.

force him to exercise the trade, not only of a
farmer, but of a corn merchant or corn retailer.
On the contrary, it in many cases prohibited the
manufacturer from exercising the trade of a
shopkeeper, or from selling his own goods by
retail. It meant by the one law to promote the
general interest of the country, or to render
corn cheap, without, perhaps, its being well un
derstood how this was to be done. By the other
it meant to promote that of a particular order of
men, the shopkeepers, who would be so much
undersold by the manufacturer, it was supposed,
that their trade would be ruined if he was al
lowed to retail at all.

The manufacturer, however, though he had
been allowed to keep a shop, and to sell his own
goods by retail, could not have undersold the
common shopkeeper. Whatever part of his ca
pital he might have placed in his shop, he must
have withdrawn it from his manufacture. In
order to carry on his business on a level with
that of other people, as he must have had the
profit of a manufacturer on the one part, so he
must have had that of a shopkeeper upon the
other. Let us suppose, for example, that in the
particular town where he lived, ten per cent, was
the ordinary profit both of manufacturing and
shopkeeping stock; he must in this case have
charged upon every piece of his own goods
which he sold in his shop, a profit of twenty per
cent. When he carried them from his work
house to his shop, he must have valued them at
the price for which he could have sold them to a

CHAP. v. THE WEALTH OF NATIONS. 301

dealer or shopkeeper, who would have bought
them by wholesale. If he valued them lower,
he lost a part of the profit of his manufacturing
capital. When again he sold them from his
shop, unless he got the same price at which a
shopkeeper would have sold them, he lost a part
of the profit of his shopkeeping capital. Though
he might appear, therefore, to make a double
profit upon the same piece of goods, yet as these
goods made successively a part of two distinct
capitals, he made but a single profit upon the
whole capital employed about them; and if he
made less than his profit, he was a loser, or did
not employ his whole capital with the same ad
vantage as the greater part of his neighbours.

What the manufacturer was prohibited to do,
the farmer was in some measure enjoined to do;
to divide his capital between two different em
ployments; to keep one part of it in his gra
naries and stack yard, for supplying the occa
sional demands of the market; and to employ
the other in the cultivation of his land. But as
he could not afford to employ the latter for less
than the ordinary profits of farming stock, so
he could as little afford to employ the former for
less than the ordinary profits of mercantile stock.
Whether the stock which really carried on the
business of a corn merchant belonged to the
person who was called a farmer, or to the person
who was called a corn merchant, an equal profit
was in both cases requisite, in order to indemnify
its owner for employing it in this manner ; in
order to put his business on a level with other

302 THE NATURE AND CAUSES OF BOOK IV.

trades, and in order to hinder him from having
an interest to change it as soon as possible for
some other. The farmer, therefore, who was
thus forced to exercise the trade of a corn mer
chant, could not afford to sell his corn cheaper
than any other corn merchant would have been
obliged to do in the case of a free competi
tion.

The dealer who can employ his whole stock
in one single branch of business, has an advan
tage of the same kind with the workman who
can employ his whole labour in one single opera
tion. As the latter acquires a dexterity which
enables him, with the same two hands, to per
form a much greater quantity of work ; so the
former acquires so easy and ready a method of
transacting his business, of buying and disposing
of his goods, that with the same capital he can
transact a much greater quantity of business. As
the one can commonly afford his work a good
deal cheaper, so the other can commonly afford
his goods somewhat cheaper than if his stock and
attention were both employed about a greater
variety of objects. The greater part of manu
facturers could not afford to retail their own
goods so cheap as a vigilant and active shop
keeper, whose sole business it was to buy them
by wholesale, and to retail them again. The
greater part of farmers could still less afford to
retail their own corn, to supply the inhabitants
of a town, at perhaps four or five miles dis
tance from the greater part of them, so cheap
as a vigilant and active corn merchant, whose

CHAP. V. THE WEALTH OF NATIONS. 303

sole business it was to purchase corn by whole
sale, to collect it into a great magazine, and to
retail it again.

The law which prohibited the manufacturer
from exercising the trade of a shopkeeper, en
deavoured to force this division in the employ
ment of stock to go on faster than it might
otherwise have done. The law which obliged
the farmer to exercise the trade of a corn mer
chant, endeavoured to hinder it from going on
so fast. Both laws were evident violations of
natural liberty, and therefore unjust; and they
were both too as impolitic as they were unjust.
It is the interest of every society, that things of
this kind should never either be forced or ob
structed. The man who employs either his la
bour or his stock in a greater variety of ways
than his situation renders necessary, can never
hurt his neighbour by underselling him. He
may hurt himself, and he generally does so. Jack
of all trades will never be rich, says the proverb.
But the law ought always to trust people with
the care of their own interest, as in their local
situations they must generally be able to judge
better of it than the legislator can do. The law,
however, which obliged the farmer to exercise
the trade of a corn merchant, was by far the
most pernicious of the two.

It obstructed not only that division in the
employment of stock which is so advantageous
to every society, but it obstructed likewise the
improvement and cultivation of the land. By
obliging the farmer to carry on two trades, in-

304 THE NATURE AND CAUSES OF BOOK IV.

stead of one, it forced him to divide his capital
into two parts, of which one only could be em
ployed in cultivation. But if he had been at
liberty to sell his whole crop to a corn merchant
as fast as he could thresh it out, his whole capi
tal might have returned immediately to the land,
and have been employed in buying more cattle,
and hiring more servants, in order to improve
and cultivate it better. But by being obliged
to sell his corn by retail, he was obliged to keep
a great part of his capital in his granaries and
stack yard through the year, and could not,
therefore, cultivate so well as with the same ca
pital he might otherwise have done. This law,
therefore, necessarily obstructed the improve
ment of the land, and, instead of tending to
render corn cheaper, must have tended to ren
der it scarcer, and therefore dearer, than it
would otherwise have been.

After the business of the farmer, that of the
corn merchant is in reality the trade which, if
properly protected and encouraged, would con
tribute the most to the raising of corn. It would
support the trade of the farmer, in the same
manner as the trade of the wholesale dealer sup
ports that of the manufacturer.

The wholesale dealer, by affording a ready
market to the manufacturer, by taking his goods
off his hand as fast as he can make them, and by
sometimes even advancing their price to him be
fore he has made them, enables him to keep his
whole capital, and sometimes even more than
his whole capital, constantly employed in maim-

CHAP. V. THE WEALTH OF NATIONS. 305

facturing, and consequently to manufacture a
much greater quantity of goods than if he was
obliged to dispose of them himself to the imme
diate consumers, or even to the retailers. As the
capital of the wholesale merchant too is gene
rally sufficient to replace that of many manufac
turers, this intercourse between him and them
interests the owner of a large capital to support
the owners of a great number of small ones, and
to assist them in those losses and misfortunes
which might otherwise prove ruinous to them.

An intercourse of the same kind universally
established between the farmers and the corn
merchants, would be attended with effects equally
beneficial to the farmers. They would be en
abled to keep their whole capitals, and even
more than their whole capitals, constantly em
ployed in cultivation. In case of any of those
accidents, to which no trade is more liable than
theirs, they would find in their ordinary cus
tomer, the wealthy corn merchant, a person who
had both an interest to support them, and the
ability to do it ; and they would not, as at pre
sent, be entirely dependent upon the forbearance
of their landlord, or the mercy of his steward.
Were it possible, as perhaps it is not, to establish
this intercourse universally, and all at once, were
it possible to turn all at once the whole farming
stock of the kingdom to its proper business, the
cultivation of land, withdrawing it from every
other employment into which any part of it may
be at present diverted, and were it possible, in
order to support and assist upon occasion the
VOL. n. x

306 THE NATURE AND CAUSES OF BOOK Iv^.

operations of this great stock, to provide all at
once another stock almost equally great, it is not
perhaps very easy to imagine how great, how
extensive, and how sudden would be the im
provement which this change of circumstances
would alone produce upon the whole face of
the country.

The statute of Edward VI., therefore, by
prohibiting as much as possible any middle man
from coming in between the grower and the
consumer, endeavoured to annihilate a trade, of
which the free exercise is not only the best pal
liative of the inconveniencies of a dearth, but
the best preventive of that calamity ; after the
trade of the farmer, no trade contributing so
much to the growing of corn as that of the corn
merchant.

The rigour of this law was afterwards softened
by several subsequent statutes, which succes
sively permitted the engrossing of corn when the
price of wheat should not exceed twenty, twenty-
four, thirty-two, and forty shillings the quarter.
At last, by the 15th of Charles II. c. 7. the en
grossing or buying of corn in order to sell it
again, as long as the price of wheat did not ex
ceed forty-eight shillings the quarter, and that
of other grain in proportion, was declared lawful
to all persons not being forestalled, that is, not
selling again in the same market within three
months. All the freedom which the trade of the
inland corn dealer has ever yet enjoyed, was be
stowed upon it by this statute. The statute of
the twelfth of the present king, which repeals

CHAP. V. THE WEALTH OF NATIONS. 307

almost all the other ancient laws against engross
ers and forestallers, does not repeal the restric
tions of this particular statute, which therefore
still continue in force.

This statute, however, authorises in some mea
sure two very absurd popular prejudices.

First, it supposes that when the price of
wheat has risen so high as forty-eight shillings
the quarter, and that of other grain in propor
tion, corn is likely to be so engrossed as to hurt
the people. But from what has been already
said, it seems evident enough that corn can
at no price be so engrossed by the inland dealers
as to hurt the people : and forty-eight shillings
the quarter besides, though it may be consi
dered as a very high price, yet in years of scar
city it is a price which frequently takes place
immediately after harvest, when scarce any part
of the new crop can be sold off, and when it
is impossible even for ignorance to suppose that
any part of it can be so engrossed as to hurt the
people.

Secondly, it supposes that there is a certain
price at which corn is likely to be forestalled,
that is, bought up in order to be sold again soon
after in the same market, so as to hurt the
people. But if a merchant ever buys up corn,
either going to a particular market, or in a parti
cular market, in order to sell it again soon after
in the same market, it must be because he judges
that the market cannot be so liberally supplied
through the whole season as upon that particular
occasion, and that the price, therefore, must

x 2

SOS THE NATURE AND CAUSES OF BOOK IV.

soon rise. If he judges wrong in this, and if the
price does not rise, he not only loses the whole
profit of the stock which he employs in this
manner, hut a part of the stock itself, by the
expense and loss which necessarily attend the
storing and keeping of corn. He hurts himself,
therefore, much more essentially than he can hurt
even the particular people whom he may hinder
from supplying themselves upon that particular
market day, because they may afterwards supply
themselves just as cheap upon any other market
day. If he judges right, instead of hurting the
great body of the people, he renders them a most
important service. By making them feel the in-
con veniencies of a dearth somewhat earlier than
they otherwise might do, he prevents their feel
ing them afterwards so severely as they certainly
would do, if the cheapness of price encouraged
them to consume faster than suited the real scar
city of the season. When the scarcity is real,
the best thing that can be done for the people is
to divide the inconveniencies of it as equally as
possible through all the different months, and
weeks, and days of the year. The interest of the
corn merchant makes him study to do this as
exactly as he can : and as no other person can
have either the same interest, or the same know
ledge, or the same abilities to do it so exactly as
he, this most important operation of commerce
ought to be trusted entirely to him ; or, in other
words, the corn trade, so far at least as concerns
the supply of the home market, ought to be left
perfectly free.

CHAP. V. THE WEALTH OF NATIONS. 309

The popular fear of engrossing and forestall
ing may be compared to the popular terrors
and suspicions of witchcraft. The unfortunate
wretches accused of this latter crime were not
more innocent of the misfortunes imputed to
them, than those who have been accused of the
former. The law which put an end to all pro
secutions against witchcraft, which put it out of
any man's power to gratify his own malice by
accusing his neighbour of that imaginary crime,
seems effectually to have put an end to those
fears and suspicions, by taking away the great
cause which encouraged and supported them.
The law which should restore entire freedom to
the inland trade of corn, would probably prove
as effectual to put an end to the popular fears of
engrossing and forestalling.

The 15th of Charles II. c. 7- however, with
all its imperfections, has perhaps contributed
more both to the plentiful supply of the home
market, and to the increase of tillage, than any
other law in the statute book. It is from this
law that the inland corn trade has derived all
the liberty and protection which it has ever yet
enjoyed; and both the supply of the home mar
ket, and the interest of tillage, are much more
effectually promoted by the inland, than either
by the importation or exportation trade.

The proportion of the average quantity of all
sorts of grain imported into Great Britain to that
of all sorts of grain consumed, it has been com
puted by the author of the tracts upon the corn
trade, does not exceed that of one to five hun-

310 THE NATURE AND CAUSES OF BOOK IT,,

dred and seventy. For supplying the home
market, therefore, the importance of the inland
trade must be to that of the importation trade
as five hundred and seventy to one.

The average quantity of all sorts of grain ex
ported from Great Britain does not, according
to the same author, exceed the one-and-thirtieth
part of the annual produce. For the encourage
ment of tillage, therefore, by providing a mar
ket for the home produce, the importance of
the inland trade must be to that of the exporta
tion trade as thirty to one.

I have no great faith in political arithmetic,
and I mean not to warrant the exactness of
either of these computations. I mention them
only in order to show of how much less conse
quence, in the opinion of the most judicious and
experienced persons, the foreign trade of corn
is than the home trade. The great cheapness
of corn in the years immediately preceding the
establishment of the bounty, may, perhaps, with
reason, be ascribed in some measure to the ope
ration of this statute of Charles IL, which had
been enacted about five-and-twenty years be
fore, and which had therefore full time to pro
duce its effect.

A very few words will sufficiently explain all
that I have to say concerning the other three
branches of the corn trade.

II. The trade of the merchant importer of
foreign corn for home consumption, evidently
contributes to the immediate supply of the home
market, and must so far be immediately bene-

CHAP. V. THE WEALTH OF NATIONS. 311

ficial to the great body of the people. It tends,
indeed, to lower somewhat the average money
price of corn, but not to diminish its real
value, or the quantity of labour which it is ca
pable of maintaining. If importation was at
all times free, our farmers and country gentle
men would probably, one year with another,
get less money for their corn than they do at
present, when importation is at most times in
effect prohibited; but the money which they
got would be of more value, would buy more
goods of all other kinds, and would employ
more labour. Their real wealth, their real re
venue, therefore, would be the same as at
present, though it might be expressed by a
smaller quantity of silver ; and they would
neither be disabled nor discouraged from cul
tivating corn as much as they do at present.
On the contrary, as the rise in the real value of
silver, in consequence of lowering the money
price of corn, lowers somewhat the money price
of all other commodities, it gives the industry
of the country where it takes place, some advan
tage in all foreign markets, and thereby tends
to encourage and increase that industry. But
the extent of the home market for corn must
be in proportion to the general industry of the
country where it grows, or to the number of
those who produce something else, and there
fore have something else, or what comes to the
same thing, the price of something else, to give
in exchange for corn. But in every country the
home market, as it is the nearest and most con
venient, so is it likewise the greatest and most

31 2 THE NATURE AND CAUSES OF BOOK IV,

important market for corn. That rise in the real
value of silver, therefore, which is the effect of
lowering the average money price of corn, tends
to enlarge the greatest and most important mar
ket for corn, and thereby to encourage, instead
of discouraging, its growth.

By the 22d of Charles II. c. 13. the importa
tion of wheat, whenever the price in the home
market did not exceed fifty-three shillings and
four-pence the quarter, was subjected to a duty
of sixteen shillings the quarter ; and to a duty of
eight shillings whenever the price did not exceed
four pounds. The former of these two prices
has, for more than a century past, taken place
only in times of very great scarcity ; and the
latter has, so far as I know, not taken place at
all. Yet, till wheat has risen above this latter
price, it was by this statute subjected to a very
high duty ; and, till it had risen above the for
mer, to a duty which amounted to a prohibition.
The importation of other sorts of grain was re
strained at rates, and by duties, in proportion
to the value of the grain, almost equally high*.

* Before the 13th of the present king, the following were the duties pay
able upon the importation of the different sorts of grain :

Grain. Duties. Duties. Duties.

Beans to 28s. per qr. 19s. lOd. after till 4Os. - J6s. 8d. then 12d,
Barley to 28s. 19s. lOd. 32s.- 16s. 12d.

Malt is prohibited by the annual Malt-tax bill.

Oats to 16s. 5s. lOd. after 9|d.

Pease to 40s. 16s. Od. after 9|d.

Bye to 36s. 19s. lOd. till 40s. - 16s. 8d. then 12s.

Wheat to 44s. 53s. 9d. till 53s. 4d. 17s. then 8s.

till 41. and after that about Is. 4d.
Buck wheat to 3'2s. per qr. to pay 16s.

These different duties were imposed, partly by the 22d of Charles II. in
place of the Old Subsidy, partly by the New Subsidy, by the One-third and
Two-thirds Subsidy, and by the Subsidy, 1747,

CHAP. V. THE WEALTH OF NATIONS. 313

Subsequent laws still further increased those
duties.

The distress, which in years of scarcity, the
strict execution of those laws might have brought
upon the people, would probably have been very
great. But, upon such occasions, its execution
was generally suspended by temporary statutes,
which permitted, for a limited time, the im
portation of foreign corn. The necessity of these
temporary statutes sufficiently demonstrates the
impropriety of this general one.

These restraints upon importation, though
prior to the establishment of the bounty, were
dictated by the same spirit, by the same prin
ciples, which afterwards enacted that regulation.
How hurtful soever in themselves, these or some
other restraints upon importation became neces
sary in consequence of that regulation. If, when
wheat was either below forty-eight shillings the
quarter, or not much above it, foreign corn
could have been imported either duty free, or
upon paying only a small duty, it might have
been exported again, with the benefit of the
bounty, to the great loss of the public revenue,
and to the entire perversion of the institution,
of which the object was to extend the market
for the home growth, not that for the growth of
foreign countries.

III. The trade of the merchant exporter of
corn for foreign consumption, certainly does not
contribute directly to the plentiful supply of the
home market. It does so, however, indirectly.
From whatever source this supply may be usually

31 4t THE NATURE AND CAUSES OF BOOK IV.

drawn, whether from home growth or from fo
reign importation, unless more corn is either
usually grown, or usually imported into the
country, than what is usually consumed in it,
the supply of the home market can never be very
plentiful. But unless the surplus can, in all or
dinary cases, be exported, the growers will be
careful never to grow more, and the importers
never to import more, than what the bare con
sumption of the home market requires. That
market will very seldom be overstocked ; but it
will generally be understocked, the people whose
business it is to supply it, being generally afraid
lest their goods should be left upon their hands.
The prohibition of exportation limits the im
provement and cultivation of the country to what
the supply of its own inhabitants requires. The
freedom of exportation enables it to extend cul
tivation for the supply of foreign nations.

By the 12th of Charles II. c. 4. the exporta
tion of corn was permitted whenever the price of
wheat did not exceed forty shillings the quarter,
and that of other grain in proportion. By the
15th of the same prince, this liberty was extended
till the price of wheat exceeded forty-eight shil
lings the quarter ; and by the 22d to all higher
prices. A poundage, indeed, was to be paid to
the king upon such exportation. But all grain
was rated so low in the book of rates, that this
poundage amounted only upon wheat to a shil
ling, upon oats to four-pence, and upon all other
grain to six-pence the quarter. By the 1st of
William and Mary, the act which established

CHAP. V. THE WEALTH OF NATIONS. 315

the bounty, this small duty was virtually taken
off whenever the price of wheat did not exceed
forty-eight shillings the quarter; and by the
llth and 12th of William III. c. 20. it was ex
pressly taken off at all higher prices.

The trade of the merchant exporter was, in
this manner, not only encouraged by a bounty,
but rendered much more free than that of the
inland dealer. By the last of these statutes, corn
could be engrossed at any price for exportation ;
but it could not be engrossed for inland sale,
except when the price did not exceed forty-eight
shillings the quarter. The interest of the in
land dealer, however, it has already been shown,
can never be opposite to that of the great body
of the people. That of the merchant exporter
may, and in fact sometimes is. If, while his
own country labours under a dearth, a neighbour
ing country should be afflicted with a famine, it
might be his interest to carry corn to the latter
country in such quantities as might very much
aggravate the calamities of the dearth. The
plentiful supply of the home market was not the
direct object of those statutes; but, under the
pretence of encouraging agriculture, to raise the
money price of corn as high as possible, and
thereby to occasion, as much as possible, a con
stant dearth in the home market. By the dis
couragement of importation, the supply of that
market, even in times of great scarcity, was
confined to the home growth; and by the en
couragement of exportation, when the price was
so high as forty-eight shillings the quarter, that

316 THE NATURE AND CAUSES OF BOOK IV.

market was not, even in times of considerable
scarcity, allowed to enjoy the whole of that
growth. The temporary laws, prohibiting for a
limited time the exportation of corn, and taking
off for a limited time the duties upon its import
ation, expedients to which Great Britain has
been obliged so frequently to have recourse,
sufficiently demonstrate the impropriety of her
general system, Had that system been good,
she would not so frequently have been reduced
to the necessity of departing from it.

Were all nations to follow the liberal system
of free exportation and free importation, the
different states into which a great continent was
divided would so far resemble the different pro
vinces of a great empire. As among the dif
ferent provinces of a great empire the freedom
of the inland trade appears, both from reason
and experience, not only the best palliative of a
dearth, but the most effectual preventive of a
famine; so would the freedom of the exporta
tion and importation trade be among the dif
ferent states into which a great continent was
divided. The larger the continent, the easier
the communication through all the different
parts of it, both by land and by water, the less
would any one particular part of it ever be ex
posed to either of these calamities, the scarcity
of any one country being more likely to be re
lieved by the plenty of some other. But very
few countries have entirely adopted this liberal
system. The freedom of the corn trade is al
most every where more or less restrained, and,

CHAP. v. THE WEALTH OF NATIONS. 317

in many countries, is confined by such absurd
regulations, as frequently aggravate the una
voidable misfortune of a dearth, into the dread
ful calamity of a famine. The demand of such
countries for corn may frequently become so
great and so urgent, that a small state in their
neighbourhood, which happened at the same
time to be labouring under some degree of
dearth, could not venture to supply them with
out exposing itself to the like dreadful calamity.
The very bad policy of one country may thus
render it in some measure dangerous and impru
dent to establish what would otherwise be the
best policy in another. The unlimited freedom
of exportation, however, would be much less
dangerous in great states, in which the growth
being much greater, the supply could seldom be
much affected by any quantity of corn that was
likely to be exported. In a Swiss canton, or in
some of the little states of Italy, it may, perhaps,
sometimes be necessary to restrain the exporta
tion of corn. In such great countries as France
or England it scarce ever can. To hinder, be
sides, the farmer from sending his goods at all
times to the best market, is evidently to sacri
fice the ordinary laws of justice to an idea of
public utility, to a sort of reasons of state 5 an
act of legislative authority which ought to be
exercised only, which can be pardoned only, in
cases of the most urgent necessity. The price
at which the exportation of corn is prohibited,
if it is ever to be prohibited, ought always to be
a very high price.

318 THE NATURE AND CAUSES OF BOOK IV.

The laws concerning corn may every where
be compared to the laws concerning religion.
The people feel themselves so much interested
in what relates either to their subsistence in this
life, or to their happiness in a life to come, that
government must yield to their prejudices, and,
in order to preserve the public tranquillity, esta
blish that system which they approve of. It is
upon this account, perhaps, that we so seldom
find a reasonable system established with regard
to either of those two capital objects.

IV. The trade of the merchant carrier, or of
the importer of foreign corn in order to export
it again, contributes to the plentiful supply of
the home market. It is not indeed the direct
purpose of his trade to sell his corn there. But
he will generally be willing to do so, and even
for a good deal less money than he might expect
in a foreign market; because he saves in this
manner the expense of loading and unloading,
of freight and insurance. The inhabitants of
the country which, by means of the carrying
trade,* becomes the magazine and storehouse for
the supply of other countries, can very seldom
be in want themselves. Though the carrying
trade must thus contribute to reduce the aver
age money price of corn in the home market,
it would not thereby lower its real value. It
would only raise somewhat the real value of
silver.

The carrying trade was in effect prohibited in
Great Britain, upon all ordinary occasions, by
the high duties upon the importation of foreign

CHAP. V. THE WEALTH OF NATIONS. 819

corn, of the greater part of which there was no
drawback ; and upon extraordinary occasions,
when a scarcity made it necessary to suspend
those duties by temporary statutes, exportation
was always prohibited. By this system of laws,
therefore, the carrying trade was in effect pro
hibited upon all occasions.

That system of laws, therefore, which is con
nected with the establishment of the bounty,
seems to deserve no part of the praise which has
been bestowed upon it. The improvement and
prosperity of Great Britain, which has been so
often ascribed to those laws, may very easily be
accounted for by other causes. That security
which the laws in Great Britain give to every
man that he shall enjoy the fruits of his own la
bour, is alone sufficient to make any country
flourish, notwithstanding these and twenty other
absurd regulations of commerce; and this secu
rity was perfected by the revolution, much about
the same time that the bounty was established.
The natural effort of every individual to better
his own condition, when suffered to exert itself
with freedom and security, is so powerful a prin
ciple, that it is alone, and without any assistance,
not only capable of carrying on the society to
wealth and prosperity, but of surmounting a
hundred impertinent obstructions with which the
folly of human laws too often incumbers its ope
rations; though the effect of these obstructions
is always more or less either to encroach upon
its freedom, or to diminish its security. In
Great Britain industry is perfectly secure; and

320 THE NATURE AND CAUSES OF BOOK IV.

though it is far from being perfectly free, it is
as free or freer than in any other part of Europe.

Though the period of the greatest prosperity
and improvement of Great Britain has been
posterior to that system of laws which is con
nected with the bounty, we must not upon that
account impute it to those laws. It has been
posterior likewise to the national debt. But the
national debt has most assuredly not been the
cause of it.

Though the system of laws which is connected
with the bounty, has exactly the same ten
dency with the police of Spain and Portugal ;
to lower somewhat the value of the precious
metals in the country where it takes place; yet
Great Britain is certainly one of the richest
countries in Europe, while Spain and Portugal
are perhaps among the most beggarly. This dif
ference of situation, however, may easily be ac
counted for from two different causes. First, the
tax in Spain, the prohibition in Portugal of ex
porting gold and silver, and the vigilant police
which watches over the execution of those laws,
must, in two very poor countries, which between
them import annually upwards of six millions
sterling, operate, not only more directly, but
much more forcibly in reducing the value of
those metals there, than the corn laws can do in
Great Britain. And, secondly, this bad policy
is not in those countries counterbalanced by the
general liberty and security of the people. In
dustry is there neither free nor secure, and the
civil and ecclesiastical governments of both Spain

CHAP. V. THE WEALTH OF NATIONS. 321

and Portugal, are such as would alone be suffi
cient to perpetuate their present state of poverty,
even though their regulations of commerce were
as wise as the greater part of them are absurd
and foolish.

The 13th of the present king, c. 43. seems to
have established a new system with regard to
the corn laws, in many respects better than the
ancient one, but in one or two respects perhaps
not quite so good.

By this statute the high duties upon importa
tion for home consumption are taken off so soon
as the price of middling wheat rises to forty-
eight shillings the quarter; that of middling rye,
pease or beans, to thirty-two shillings ; that of
barley to twenty-four shillings; and that of oats
to sixteen shillings; and instead of them a small
duty is imposed of only six-pence upon the quar
ter of wheat, and upon that of other grain in
proportion. With regard to all these different
sorts of grain, but particularly with regard to
wheat, the home market is thus opened to fo
reign supplies at prices considerably lower than
before.

By the same statute the old bounty of five
shillings upon the exportation of wheat ceases so
soon as the price rises to forty-four shillings the
quarter, instead of forty-eight, the price at which
it ceased before; that of two shillings and six
pence upon the exportation of barley ceases so
soon as the price rises to twenty-two shillings,
instead of twenty-four, the price at which it

VOL. TI. Y

322 THE NATURE AND CAUSES OF BOOK IV.

ceased before ; that of two shillings and six-pence
upon the exportation of oatmeal ceases so soon
as the price rises to fourteen shillings, instead of
fifteen, the price at which it ceased before. The
bounty upon rye is reduced from three shillings
and six-pence to three shillings, and it ceases so
soon as the price rises to twenty-eight shillings,
instead of thirty-two, the price at which it ceased
before. If bounties are as improper as I have
endeavoured to prove them to be, the sooner
they cease, and the lower they are, so much the
better.

The same statute permits, at the lowest prices,
the importation of corn, in order to be exported
again, duty free, provided it is in the mean time
lodged in a warehouse under the joint locks of
the king and the importer. This liberty, indeed,
extends to no more than twenty-five of the dif
ferent ports of Great Britain. They are, how
ever, the principal ones, and there may not, per
haps, be warehouses proper for this purpose in
the greater part of the others.

So far this law seems evidently an improve
ment upon the ancient system.

But by the same law a bounty of two shillings
the quarter is given for the exportation of oats
whenever the price does not exceed fourteen
shillings. No bounty had ever been given be
fore for the exportation of this grain, no more
than for that of pease or beans.

By the same law too, the exportation of wheat
is prohibited so soon as the price rises to forty-

CHAP. VI. THE WEALTH OF NATIONS. 823

four shillings the quarter; that of rye so soon as
it rises to twenty-eight shillings; that of barley
so soon as it rises to twenty-two shillings; and
that of oats so soon as they rise to fourteen shil
lings. Those several prices seem all of them a
good deal too low, and there seems to be an im
propriety, besides, in prohibiting exportation
altogether at those precise prices at which that
bounty, which was given in order to force it, is
withdrawn. The bounty ought certainly either
to have been withdrawn at a much lower price,
or exportation ought to have been allowed at a
much higher.

So far, therefore, this law seems to be inferior
to the ancient system. With all its imperfec
tions, however, we may perhaps say of it what
was said of the laws of Solon, that though not
the best in itself, it is the best which the inte-
terests, prejudices, and temper of the time
would admit of. It may perhaps in due time
prepare the way for a better.

CHAPTER VI.

Of Treaties of Commerce.

WHEN a nation binds itself by treaty either
to permit the entry of certain goods from one fo
reign country which it prohibits from all others,
or to exempt the goods of one country from
duties to which it subjects those of all others,

324 THE NATURE AND CAUSES OF BOOK IV.

the country, or at least the merchants and ma
nufacturers of the country, whose commerce is
so favoured, must necessarily derive great advan
tage from the treaty. Those merchants and
manufacturers enjoy a sort of monopoly in the
country which is so indulgent to them. That
country becomes a market both more extensive
and more advantageous for their goods: more
extensive, because the goods of other nations
being either excluded or subjected to heavier
duties, it takes off a greater quantity of theirs :
more advantageous, because the merchants of
the favoured country enjoying a sort of mono
poly there, will often sell their goods for a bet
ter price than if exposed to the free competition
of all other nations.

Such treaties, however, though they may be
advantageous to the merchants and manufac
turers of the favoured, are necessarily disadvan
tageous to those of the favouring country. A
monopoly is thus granted against them to a fo
reign nation ; and they must frequently buy the
foreign goods they have occasion for, dearer than
if the free competition of other nations was ad
mitted. That part of its own produce with
which such a nation purchases foreign goods,
must consequently be sold cheaper, because when
two things are exchanged for one another, the
cheapness of the one is a necessary consequence,
or rather is the same thing with the dearness of
the other. The exchangeable value of its annual
produce, therefore, is likely to be diminished by
every such treaty. This diminution, however,

CHAP. vi. THE WEALTH OF NATIONS. 325

can scarce amount to any positive loss, but only
to a lessening of the gain which it might other
wise make. Though it sells its goods cheaper
than it otherwise might do, it will not probably
sell them for less than they cost ; nor, as in the
case of bounties, for a price which will not re
place the capital employed in bringing them to
market, together with the ordinary profits of
stock. The trade could not go on long if it
did. Even the favouring country, therefore,
may still gain by the trade, though less than if
there was a free competition.

Some treaties of commerce, however, have
been supposed advantageous upon principles
very different from these ; and a commercial
country has sometimes granted a monopoly of
this kind against itself to certain goods of a
foreign nation, because it expected that in the
whole commerce between them, it would an
nually sell more than it would buy, and that a
balance in gold and silver would be annually
returned to it. It is upon this principle that
the treaty of commerce between England and
Portugal, concluded in 1703, by Mr. Methuen,
has been so much commended. The following
is a literal translation of that treaty, which con
sists of three articles only.

ART. I.

His sacred royal majesty of Portugal promises,
both in his own name and that of his successors,
to admit, for ever hereafter, into Portugal, the

326 THE NATURE AND CAUSES OF BOOKlv.

woollen cloths, and the rest of the woollen ma
nufactures of the British as was accustomed, till
they were prohibited by the law ; nevertheless
upon this condition :

ART. II.

That is to say, that her sacred royal majesty
of Great Britain shall, in her own name, and
that of her successors, be obliged, for ever here
after, to admit the wines .of the growth of Por
tugal into Britain : so that at no time, whether
there shall be peace or war between the king
doms of Britain and France, any thing more
shall be demanded for these wines by the name
of custom or duty, or by whatsoever other title,
directly or indirectly, whether they shall be im
ported into Great Britain in pipes or hogsheads,
or other casks, than what shall be demanded for
the like quantity or measure of French wine,
deducting or abating a third part of the custom
or duty. But if at any time this deduction or
abatement of customs, which is to be made as
aforesaid, shall in any manner be attempted and
prejudiced, it shall be just and lawful for his
sacred royal majesty of Portugal, again to pro.
hibit the woollen cloths, and the rest of the
British woollen manufactures.

ART. III.

The most excellent lords the plenipotentiaries
promise and take upon themselves, that their
above-named masters shall ratify this treaty ; and

CHAP. VI. THE WEALTH OF NATIONS. 327

within the space of two months the ratifications
shall be exchanged.

By this treaty the crown of Portugal becomes
bound to admit the English woollens upon the
same footing as before the prohibition ; that is,
not to raise the duties which had been paid be
fore that time. But it does not become bound
to admit them upon any better terms than those
of any other nation, of France or Holland, for
example. The crown of Great Britain, on the
contrary, becomes bound to admit the wines of
Portugal upon paying only two-thirds of the
duty, which is paid for those of France, the
wines most likely to come into competition with
them. So far this treaty, therefore, is evidently
advantageous to Portugal, and disadvantageous
to Great Britain.

It has been celebrated, however, as a master
piece of the commercial policy of England.
Portugal receives annually from the Brazils a
greater quantity of gold than can be employed
in its domestic commerce, whether in the shape
of coin or of plate. The surplus is too valuable
to be allowed to lie idle and locked up in coffers,
and as it can find no advantageous market at
home, it must, notwithstanding any prohibition,
be sent abroad, and exchanged for something for
which there is a more advantageous market at
home. A large share of it comes annually to
England, in return either for English goods, or
for those of other European nations that receive
their returns through England. Mr. Barretti

328 THE NATURE AND CAUSES OF BOOK iv.

was informed that the weekly packet boat from
Lisbon brings, one week with another, more than
fifty thousand pounds in gold to England. The
sum had probably been exaggerated. It would
amount to more than two millions six hundred
thousand pounds a year, which is more than the
Brazils are supposed to afford.

Our merchants were some years ago out of
humour with the crown of Portugal. Some pri
vileges which had been granted them, not by
treaty, but by the free grace of that crown, at
the solicitation, indeed, it is probable, and in
return for much greater favours, defence, and
protection, from the crown of Great Britain, had
been either infringed or revoked. The people,
therefore, usually most interested in celebrating
the Portugal trade, were then rather disposed
to represent it as less advantageous than it had
commonly been imagined. The far greater
part, almost the whole, they pretended, of this
annual importation of gold, was not on account
of Great Britain, but of other European na
tions; the fruits and wines of Portugal annually
imported into Great Britain nearly compensating
the value of the British goods sent thither.

Let us suppose, however, that the whole
was on account of Great Britain, and that it
amounted to a still greater sum than Mr.
Barrett! seems to imagine : this trade would
not, upon that account, be more advantageous
than any other in which, for the same value
sent out, we received an equal value of con*
sumable goods in return.

CHAP. vl. THE WEALTH OF NATIONS. 329

It is but a very small part of this importation
which, it can be supposed, is employed as an
annual addition either to the plate or to the coin
of the kingdom. The rest must all be sent
abroad and exchanged for consumable goods of
some kind or other. But if those consumable
goods were purchased directly with the produce
of English industry, it would be more for the ad
vantage of England, than first to purchase with
that produce the gold of Portugal, and after
wards to purchase with that gold those con
sumable goods. A direct foreign trade of con
sumption is always more advantageous than a
round-about one ; and to bring the same value
of foreign goods to the home-market, requires a
much smaller capital in the one way than in the
other. If a smaller share of its industry, there
fore, had been employed in producing goods fit
for the Portugal market, and a greater in pro
ducing those fit for the other markets, where those
consumable goods for which there is a demand
in Great Britain are to be had, it would have
been more for the advantage of England. To
procure both the gold, which it wants for its
own use, and the consumable goods, would, in
this way, employ a much smaller capital than at
present. There would be a spare capital, there
fore, to be employed for other purposes, in ex
citing an additional quantity of industry, and in
raising a greater annual produce.

Though Britain were entirely excluded from
the Portugal trade, -it could find very little dif
ficulty in procuring all the annual supplies of gold

330 THE NATURE AND CAUSES OF BOOK IV.

which it wants, either for the purposes of plate,
or of coin, or of foreign trade. Gold, like every
other commodity, is always somewhere or ano
ther to be got for its value by those who have
that value to give for it. The annual surplus of
gold in Portugal, besides, would still be sent
abroad, and though not carried away by Great
Britain, would be carried away by some other
nation, which would be glad to sell it again for
its price, in the same manner as Great Britain
does at present. In buying gold of Portugal,
indeed, we buy it at the first hand ; whereas, in
buying it of any other nation, except Spain, we
should buy it at the second, and might pay some
what dearer. This difference, however, would
surely be too insignificant to deserve the public
attention.

Almost all our gold, it is said, comes from
Portugal. With other nations the balance of
trade is either against us, or not much in our
favour. But we should remember, that the
more gold we import from one country, the less
we must necessarily import from all others. The
effectual demand for gold, like that for every
other commodity, is in every country limited to
a certain quantity. If nine-tenths of this quan
tity are imported from one country, there re
mains a tenth only to be imported from all
others. The more gold besides that is annually
imported from some particular countries, over
and above what is requisite for plate and for
coin, the more must necessarily be exported to
some others j and the more that most insignifi-

CHAP. vi. THE WEALTH OF NATIONS. 331

cant object of modern policy, the balance of
trade, appears to be in our favour with some par
ticular countries, the more it must necessarily
appear to be against us with many others.

It was upon this silly notion, however, that
England could not subsist without the Portugal
trade, that, towards the end of the late war,
France and Spain, without pretending either
offence or provocation, required the king of
Portugal to exclude all British ships from his
ports, and for the security of this exclusion, to
receive into them French or Spanish garrisons.
Had the king of Portugal submitted to those ig
nominious terms which his brother-in-law the
king of Spain proposed to him, Britain would
have been freed from a much greater incon-
veniency than the loss of the Portugal trade, the
burden of supporting a very weak ally, so un
provided of every thing for his own defence,
that the whole power of England, had it been
directed to that single purpose, could scarce per
haps have defended him for another campaign.
The loss of the Portugal trade would, no doubt,
have occasioned a considerable embarrassment to
the merchants at that time engaged in it, who
might not, perhaps, have found out, for a year
or two, any other equally advantageous method
of employing their capitals ; and in this would
probably have consisted all the inconveniency
which England could have suffered from this
notable piece of commercial policy.

The great annual importation of gold and
silver is neither for the purpose of plate nor of

332 THE NATURE AND CAUSES OF BOOK IV.

coin, bat of foreign trade. A round-about
foreign trade of consumption can be carried on
more advantageously by means of these metals
than of almost any other goods. As they are
the universal instruments of commerce, they are
more readily received in turn for all commodi
ties than any other goods ; and on account of
their small bulk and great value, it costs less to
transport them backward and forward from one
place to another than almost any other sort of
merchandize, and they lose less of their value by
being so transported. Of all the commodities,
therefore, which are bought in one foreign coun
try, for no other purpose but to be sold or ex
changed again for some other goods in another,
there are none so convenient as gold and silver.
In facilitating all the different round-about fo
reign trades of consumption which are carried
on in Great Britain, consists the principal ad
vantage of the Portugal trade ; and though it is
not a capital advantage, it is, no doubt, a con
siderable one.

That any annual addition which, it can rea
sonably be supposed, is made either to the plate
or to the coin of the kingdom, could require but
a very small annual importation of gold and sil
ver, seems evident enough ; and though we had
no direct trade with Portugal, this small quan
tity could always, somewhere or another, be very
easily got.

Though the goldsmiths' trade be very con
siderable in Great Britain, the far greater part
of the new plate which they annually sell, is

CHAP. vi. THE WEALTH OF NATIONS. 333

made from other old plate melted down ; so that
the addition annually made to the whole plate
of the kingdom cannot be very great, and could
require but a very small annual importation.

It is the same case with the coin. Nobody
imagines, I believe, that even the greater part
of the annual coinage, amounting, for ten years
together, before the late reformation of the gold
coin, to upwards of eight hundred thousand
pounds a year in gold, was an annual addition
to the money before current in the kingdom. In
a country where the expense of the coinage is
defrayed by the government, the value of the
coin, even when it contains its full standard
weight of gold and silver, can never be much
greater than that of an equal quantity of those
metals uncoined; because it requires only the
trouble of going to the mint, and the delay per
haps of a few weeks, to procure for any quantity
of uncoined gold and silver an equal quantity of
those metals in coin. But, in every country,
the greater part of the current coin is almost
always more or less worn, or otherwise degene
rated from its standard. In Great Britain it
was, before the late reformation, a good deal so,
the gold being more than two per cent, and the
silver more than eight per cent, below its stand
ard weight. But if forty-four guineas and a
half, containing their full standard weight, a
pound weight of gold, could purchase very little
more than a pound wreight of uncoined gold,
forty-four guineas and a half wanting a part of
their weight could not purchase a pound weight,

334 THE NATURE AND CAUSES OF BOOK IV.

and something was to be added in order to make
up the deficiency. The current price of gold
bullion at market, therefore, instead of being
the same with the mint price, or 46/. 14s. 6d.
was then about 47 /. Us. and sometimes about
forty-eight pounds. When the greater part of
the coin, however, was in this degenerate con
dition, forty-four guineas and a half, fresh from
the mint, would purchase no more goods in the
market than any other ordinary guineas, because
when they came into the coffers of the merchant,
being confounded with other money, they could
not afterwards be distinguished without more
trouble than the difference was worth. Like
other guineas they were worth no more than
46/. 14^. 6d. If thrown into the melting pot,
however, they produced, without any sensible
loss, a pound weight of standard gold, which
could be sold at any time for between 4T/L 14s.
and 48/. either in gold or silver, as fit for all
the purposes of coin as that which had been
melted down. There was an evident profit,
therefore, in melting down new coined money,
and it was done so instantaneously, that no pre
caution of government could prevent it. The
operations of the mint were, upon this account,
somewhat like the web of Penelope; the work
that was done in the day was undone in the night.
The mint was employed, not so much in making
daily additions to the coin, as in replacing the
very best part of it which was daily melted down.
Were the private people, who carry their
gold and silver to the mint, to pay themselves

CHAP. VI. THE WEALTH OF NATIONS. 335

for the coinage, it would add to the value of
those metals in the same manner as the fashion
does to that of plate. Coined gold and silver
would be more valuable than uncoined. The
seignorage, if it was not exorbitant, would add
to the bullion the whole value of the duty ; be
cause, the government having every where the
exclusive privilege of coining, no coin can come
to market' cheaper than they think proper to
afford it. If the duty was exorbitant indeed,
that is, if it was very much above the real value
of the labour and expense requisite for coinage,
false coiners, both at home and abroad, might
be encouraged, by the great difference between
the value of bullion and that of coin, to pour in
so great a quantity of counterfeit money as might
reduce the value of the government money. In
France, however, though the seignorage is eight
per cent, no sensible inconveniency of this kind
is found to arise from it. The dangers to which
a false coiner is every where exposed, if he lives
in the country of which he counterfeits the coin,
and to which his agents or correspondents are
exposed if he lives in a foreign country, are by
far too great to be incurred for the sake of a
profit of six or seven per cent.

The seignorage in France raises the value
of the coin higher than in proportion to the
quantity of pure gold which it contains. Thus
by the edict of January 1726, the * mint price

* See Dictionnaire des Monnoies, torn. ii. article Seigneur-
age, p. 489. par M. Abot de Bazinghen, Conseiller-Com-
missaire en la, Cour des Monnoies a Paris.

336 THE NATURE AND CAUSES OF BOOK IV.

of fine gold of twenty-four carats was fixed at
seven hundred and forty livres nine sous and
one denier one eleventh, the mark of eight
Paris ounces. The gold coin of France, making
an allowance for the remedy of the mint, con
tains twenty-one carats and three-fourths of fine
gold, and two carats one-fourth of alloy. The
mark of standard gold, therefore, is worth no
more than about six hundred and seventy-one
livres ten deniers. But in France this mark of
standard gold is coined into thirty Louis-d'ors
of twenty-four livres each, or into seven hun
dred and twenty livres. The coinage, therefore,
increases the value of a mark of standard gold
bullion, by the difference between six hundred
and seventy-one livres ten deniers, and seven
hundred and twenty livres ; or by forty-eight
livres nineteen sous and two deniers.

A seignorage will, in many cases, take away
altogether, and will, in all cases, diminish the
profit of melting down the new coin. This
profit always arises from the difference between
the quantity of bullion which the common cur
rency ought to contain, and that which it
actually does contain. If this difference is less
than the seignorage, there will be loss instead of
profit. If it is equal to the seignorage, there
will neither be profit nor loss. If it is greater
than the seignorage, there will indeed be some
profit, but less than if there was no seignorage.
If, before the late reformation of the gold coin,
for example, there had been a seignorage of five
per cent, upon the coinage, there would have

CHAP. VI. THE WEALTH OF NATIONS. 337

been a loss of three per cent, upon the melting
down of the gold coin. If the seignorage had
been two per cent., there would have been nei
ther profit nor loss. If the seignorage had been
one per cent., there would have been a profit,
but of one per cent, only instead of two per cent.
Wherever money is received by tale, therefore,
and not by weight, a seignorage is the most
effectual preventive of the melting down of the
coin, and, for the same reason, of its exporta
tion. It is the best and heaviest pieces that are
commonly either melted down or exported ; be
cause it is upon such that the largest profits are
made.

The law for the encouragement of the coin
age, by rendering it duty-free, was first enacted,
during the reign of Charles II. for a limited
time ; and afterwards continued, by different
prolongations, till 1?69, when it was rendered
perpetual. The bank of England, in order to
replenish their coffers with money, are frequently
obliged to carry bullion to the mint ; and^it was
more for their interest, they probably imagined,
that the coinage should be at the expense of the
government, than at their own. It was, pro
bably, out of complaisance to this great com
pany that the government agreed to render this
law perpetual. Should the custom of weighing
gold, however, come to be disused, as it is very
likely to be on account of its inconveniency ;
shoulcl the gold coin of England come to be
received by tale, as it was before the late re-
coinage, this great company may, perhaps, find
VOL. ir. z

338 THE NATURE AND CAUSES OF BOOK IV

that they have upon this, as, upon some other
occasions, mistaken their own interest not a
little.

Before the late re-coinage, when the gold
currency of England was two per cent, below its
standard weight, as there was no seignorage, it
was two per cent, below the value of that quan
tity of standard gold bullion which it ought to
have contained. When this great company,
therefore, bought gold bullion in order to have
it coined, they were obliged to pay for it two
per cent, more than it was worth after the coin
age. But if there had been a seignorage of two
per cent, upon the coinage, the common gold
currency, though two per cent, below its stand
ard weight, would notwithstanding have been
equal in value to the quantity of standard gold
which it ought to have contained ; the value of
the fashion compensating in this case, the dimi
nution of the weight. They would indeed have
had the seignorage to pay, which being two per
cent, their loss upon the whole transaction would
have been two per cent, exactly the same, but
no greater than it actually was.

If the seignorage had been five per cent, and
the gold currency only two per cent, below its
standard weight, the bank would in this case
have gained three per cent, upon the price of
the bullion ; but as they would have had a
seignorage of five per cent, to pay upon the
coinage, their loss upon the whole transaction
would, in the same manner, have been exactly
two per cent.

CHAP. VI. THE WEALTH OF NATIONS. 339

If the seignorage had been only one per cent,
and the gold currency two per cent, below its
standard weight, the bank would in this case
have lost only one per cent, upon the price of
the bullion ; but as they would likewise have
had a seignorage of one per cent, to pay, their
loss upon the whole transaction would have been
exactly two per cent, in the same manner as in
all other cases.

If there was a reasonable seignorage, while at
the same time the coin contained its full standard
weight, as it has done very nearly since the late
re-coinage, whatever the bank might lose by the
seignorage, they would gain upon the price of
the bullion ; and whatever they might gain upon
the price of the bullion, they would lose by the
seignorage. They would neither lose nor gain,
therefore, upon the whole transaction, and they
would in this, as in all the foregoing cases, be
exactly in the same situation as if there was no
seignorage.

When the tax upon a commodity is so mode
rate as not to encourage smuggling, the mer
chant who deals in it, though he advances, does
not properly pay the tax, as he gets it back in
the price of the commodity. The tax is finally
paid by the last purchaser or consumer. But
money is a commodity with regard to which
every man is a merchant. Nobody buys it but
in order to sell it again ; and with regard to it
there is in ordinary cases no last purchaser or
consumer. When the tax upon coinage, there
fore, is so moderate as not to encourage false

z 2

340 THE NATURE AND CAUSES OF BOOK IV,

coining, though every body advances the tax,
nobody finally pays it ; because every body gets
it back in the advanced value of the coin.

A moderate seignorage, therefore, would not
in any case augment the expense of the bank, or
of any other private persons who carry their bul
lion to the mint in order to be coined, and the
want of a moderate seignorage does not in any
case diminish it. Whether there is or is not a
seignorage, if the currency contains its full stand
ard weight, the coinage costs nothing to any body,
and if it is short of that weight, the coinage must
always cost the difference between the quantity
of bullion which ought to be contained in it, and
that which actually is contained in it.

The government, therefore, when it defrays
the expense of coinage, not only incurs some
small expense, but loses some small revenue
which it might get by a proper duty ; and nei
ther the bank nor any other private persons are
in the smallest degree benefited by this useless
piece of public generosity.

The directors of the bank, however, would
probably be unwilling to agree to the imposition
of a seignorage upon the authority of a specula
tion which promises them no gain, but only pre
tends to insure them from any loss. In the pre
sent state of the gold coin, and as long as it con
tinues to be received by weight, they certainly
would gain nothing by such a change. But if the
custom of weighing the gold coin should ever go
into disuse, as it is very likely to do, and if the
gold coin should ever fall into the same state of

CHAP. VI. THE WEALTH OF NATIONS. 341

degradation in which it was before the late re-
coinage, the gain, or more properly the savings
of the bank, in consequence of the imposition
of a seignorage, would probably be very con
siderable. The bank of England is the only
company which sends any considerable quantity
of bullion to the mint, and the burden of the
annual coinage falls entirely, or almost entirely,
upon it. If this annual coinage had nothing to
do but to repair the unavoidable losses and ne
cessary wear and tear of the coin, it could seldom
exceed fifty thousand or at most a hundred thou
sand pounds. But when the coin is degraded
below its standard weight, the annual coinage
must, besides this, fill up the large vacuities
which exportation and the melting pot are con
tinually making in the current coin. It was
upon this account that during the ten or twelve
years immediately preceding the late reforma
tion of the gold coin, the annual coinage
amounted at an average to more than eight
hundred and fifty thousand pounds. But if there
had been a seignorage of four or five per cent,
upon the gold coin, it would probably, even in
the state in which things then were, have put an
effectual stop to the business both of exportation
and of the melting pot. The bank, instead of
losing every year about two and a half per cent,
upon the bullion which was to be coined into
more than eight hundred and fifty thousand
pounds, or incurring an annual loss of more
than twenty-one thousand two hundred and fifty

THE NATURE AND CAUSES OF BOOK iv.

pounds, would not probably have incurred the
tenth part of that loss.

The revenue allotted by parliament for de
fraying the expense of the coinage is but four
teen thousand pounds a year, and the real ex
pense which it costs the government, or the fees
of the officers of the mint, do not, upon ordinary
occasions, I am assured, exceed the half of that
sum. The saving of so very small a sum, or
even the gaining of another which could not
well be much larger, are objects too inconsider
able, it may be thought, to deserve the serious
attention of government. But the saving of
eighteen or twenty thousand pounds a year in
case of an event which is not improbable, which
has frequently happened before, and which is
very likely to happen again, is surely an object
which well deserves the serious attention even
of so great a company as the bank of England.

Some of the foregoing reasonings and observa
tions might perhaps have been more properly
placed in those chapters of the first book which
treat of the origin and use of money, and of the
difference between the real and the nominal
price of commodities. But as the law for the
encouragement of coinage derives its origin
from those vulgar prejudices which have been
introduced by the mercantile system, I judged
it more proper to reserve them for this chapter.
Nothing could be more agreeable to the spirit of
that system than a sort of bounty upon the pro
duction of money, the very thing which, it sup-

CHAP vii. THE WEALTH OF NATIONS. 343

poses, constitutes the wealth of every nation. It
is one of its many admirable expedients for en
riching the country.

CHAPTER VII.

Of Colonies.

PART I.

Of the Motives for establishing new Colonies.

THE interest which occasioned the first settle
ment of the different European colonies in Ame
rica and the West Indies, was not altogether so
plain and distinct as that which directed the
establishment of those of ancient Greece and
Rome.

All the different states of ancient Greece pos
sessed, each of them, but a very small territory,
arid when the people in any one of them mul
tiplied beyond what that territory could easily
maintain, a part of them were sent in quest of
a new habitation in some remote and distant
part of the world ; the warlike neighbours who
surrounded them on all sides, rendering it dif
ficult for any of them to enlarge very much its
territory at home. The colonies of the Dorians
resorted chiefly to Italy and Sicily, which, in the
times preceding the foundation of Rome, were
inhabited by barbarous and uncivilized nations :

344 THE NATURE AND CAUSES OF BOOK iv.

those of the lonians and Eolians, the two other
great tribes of the Greeks, to Asia Minor and
the islands of the Egean Sea, of which the in
habitants seem at that time to have been pretty
much in the same state as those of Sicily and
Italy. The mother city, though she considered
the colony as a child, at all times entitled to
great favour and assistance, and owing in return
much gratitude and respect, yet considered it as
an emancipated child, over whom she pretended
to claim no direct authority or j urisdiction. The
colony settled its own form of government, en
acted its own laws, elected its own magistrates,
and made peace or war with its neighbours as
an independent state, which had no occasion
to wait for the approbation or consent of the
mother city. Nothing can be more plain and
distinct than the interest which directed every
such establishment.

Rome, like most of the other ancient repub
lics, was originally founded upon an Agrarian
law, which divided the public territory in a cer
tain proportion among the different citizens who
composed the state. The course of human af
fairs, by marriage, by succession, and by alien
ation, necessarily deranged this original division,
and frequently threw the lands, which had been
allotted for the maintenance of many different
families, into the possession of a single person.
To remedy this disorder, for such it was sup
posed to be, a law was made, restricting the
quantity of land which any citizen could possess
to five hundred jugera, about three hundred and

CHAP. vil. THE WEALTH OF NATIONS. 345

fifty English acres. This law, however, though
we read of its having been executed upon one or
two occasions, was either neglected or evaded,
and the inequality of fortunes went on continu
ally increasing. The greater part of the citi
zens had no land, and without it the manners
and customs of those times rendered it difficult
for a freeman to maintain his independency. In
the present times, though a poor man has no
land of his own, if he has a little stock, he may
either farm the lands of another, or he may carry
on some little retail trade; and if he has no
stock, he may find employment either as a coun
try labourer, or as an artificer. But among the
ancient Romans, the lands of the rich were all
cultivated by slaves, who wrought under an
overseer, who was likewise a slave ; so that a
poor freeman had little chance of being em
ployed either as a farmer or as a labourer. All
trades and manufactures too, even the retail
trade, were carried on by the slaves of the rich
for the benefit of their masters, whose wealth,
authority, and protection, made it difficult for a
poor freeman to maintain the competition against
them. The citizens, therefore, who had no land,
had scarce any other means of subsistence but
the bounties of the candidates at the annual elec
tions. The tribunes, when they had a mind to
animate the people against the rich and the
great, put them in mind of the ancient division
of lands, and represented that law which re
stricted this sort of private property as the fun
damental law of the republic. The people be-

346 THE NATURE AND CAUSES OF BOOK iv.

came clamorous to get land, and the rich and
the great, we may believe, were perfectly deter
mined not to give them any part of theirs. To
satisfy them in some measure, therefore, they
frequently proposed to send out a new colony.
But conquering Rome was, even upon such oc
casions, under no necessity of turning out her
citizens to seek their fortune, if one may say so,
through the wide world, without knowing where
they were to settle. She assigned them lands
generally in the conquered provinces of Italy,
where, being within the dominions of the re
public, they could never form any independent
state; but were at best but a sort of corporation,
which, though it had the power of enacting by
laws for its own government, was at all times
subject to the correction, jurisdiction, and le
gislative authority of the mother city. The
sending out a colony of this kind not only gave
some satisfaction to the people, but often esta
blished a sort of garrison too in a newly con
quered province, of which the obedience might
otherwise have been doubtful. A Roman colony,
therefore, whether we consider the nature of the
establishment itself, or the motives for making
it, was altogether different from a Greek one.
The words accordingly, which in the original
languages denote those different establishments,
have very different meanings. The Latin word
(Colonia) signifies simply a plantation. The
Greek word (atfo^a), on the contrary, signifies a
separation of dwelling, a departure from home,
a going out of the house. But, though the

CHAP. vii. THE WEALTH OF NATIONS. 347

Roman colonies were in many respects differ
ent from the Greek ones, the interest which
prompted to establish them was equally plain
and distinct. Both institutions derived their
origin either from irresistible necessity, or from
clear and evident utility.

The establishment of the European colonies
in America and the West Indies arose from no
necessity: and though the utility which has re
sulted from them has been very great, it is not
altogether so clear and evident. It was not un
derstood at their first establishment, and was not
the motive either of that establishment or of the
discoveries which gave occasion to it; and the
nature, extent, and limits of that utility are not,
perhaps, well understood at this day.

The Venetians, during the fourteenth and fif
teenth centuries, carried on a very advantageous
commerce in spiceries, and other East India
goods, which they distributed among the other
nations of Europe. They purchased them chiefly
in Egypt, at that time under the dominion of
the Mammeluks, the enemies of the Turks, of
whom the Venetians were the enemies ; and this
union of interest, assisted by the money of Ve
nice, formed such a connexion as gave the Ve
netians almost a monopoly of the trade.

The great profits of the Venetians tempted
the avidity of the Portuguese. They had been
endeavouring, during the course of the fifteenth
century, to find out by sea a way to the countries
from which the Moors brought them ivory and
gold dust across the Desart. They discovered

348 THE NATURE AND CAUSES OF HOOK iv.

the Madeiras, the Canaries, the Azores, the
Cape de Verd islands, the coast of Guinea, that
of Loango, Congo, Angola, and Benguela, and,
finally, the Cape of Good Hope. They had long
wished to share in the profitable traffic of the
Venetians, and this last discovery opened to
them a probable prospect of doing so. In 1497>
Vasco de Gama sailed from the port of Lisbon
with a fleet of four ships, and after a navigation
of eleven months, arrived upon the coast of In-
dostan, and thus completed a course of disco
veries which had been pursued with great steadi
ness, and with very little interruption, for near
a century together.

Some years before this, while the expectations
of Europe were in suspense about the projects of
the Portuguese, of which the success appeared yet
to be doubtful, a Genoese pilot formed the yet
more daring project of sailing to the East Indies
by the West. The situation of those countries
was at that time very imperfectly known in Eu
rope. The few European travellers who had
been there, had magnified the distance; perhaps
through simplicity and ignorance, what was really
very great, appearing almost infinite to those who
could not measure it ; or, perhaps, in order to
increase somewhat more the marvellous of their
own adventures in visiting regions so immensely
remote from Europe. The longer the way was
by theEast, Columbus veryjustly concluded, the
shorter it would be by the West. He proposed,
therefore, to take that way, as both the shortest
and the surest, and he had the good fortune to

CHAP. VII. THE WEALTH OF NATIONS. 349

convince Isabella of Castile of the probability
of his project. He sailed from the port of Palos
in August 1492, near five years before the ex
pedition of Vasco de Gama set out from Por
tugal, and, after a voyage of between two and
three months, discovered first some of the small
Bahama or Lucayan islands, and afterwards the
great island of St. Domingo.

But the countries which Columbus discovered
either in this or in any of his subsequent voy
ages, had no resemblance to those which he
had gone in quest of. Instead of the wealth,
cultivation, and populousness of China and In-
dostan, he found, in St. Domingo, and in all the
other parts of the new world which he ever
visited, nothing but a country quite covered with
wood, uncultivated, and inhabited only by some
tribes of naked and miserable savages. He was
not very willing, however, to believe that they
were not the same with some of the countries
described by Marco Polo, the first European who
had visited, or at least had left behind him any
description of China or the East Indies ; and a
very slight resemblance, such as that which he
found between the name of Cibao, a mountain
in St. Domingo, and that of Cipango, mentioned
by Marco Polo, was frequently sufficient to
make him return to this favourite prepossession,
though contrary to the clearest evidence. In his
letters to Ferdinand and Isabella, he called the
countries which he had discovered the Indies.
He entertained no doubt but that they were the
extremity of those which had been described by

350 THE NATURE AND CAUSES OF BOOK IV.

Marco Polo, and that they were not very di
stant from the Ganges, or from the countries
which had been conquered by Alexander. Even
when at last convinced that they were different,
he still flattered himself that those rich coun
tries were at no great distance ; and in a sub
sequent voyage, accordingly, went in quest of
them along the coast of Terra Firma, and to
wards the isthmus of Dajien.

In consequence of this mistake of Columbus,
the name of the Indies has stuck to those unfor
tunate countries ever since : and when it was at
last clearly discovered that the new were alto
gether different from the old Indies, the former
were called the West, in contradistinction to
the latter, which were called the East Indies.

It was of importance to Columbus, however,
that the countries which he had discovered,
whatever they were, should be represented to
the court of Spain as of very great consequence ;
and, in what constitutes the real riches of every
country, the animal and vegetable productions of
the soil, there was at that time nothing which
could well justify such a representation of them.,

The Cori, something between a rat and a rab
bit, and supposed by Mr. Buffon to be the same
with the Aperea of Brazil, was the largest vivi
parous quadruped in St. Domingo. This species
seems never to have been very numerous, and the
dogs and cats of the Spaniards are said to have
long ago almost entirely extirpated it, as well as
some other tribes of a still smaller size. These,
however, together with a pretty large lizard, called

CHAP. vil. THE WEALTH OF NATIONS. 351

the Ivana or Iguana, constituted the principal
part of the animal food which the land afforded.

The vegetable food of the inhabitants, though
from their want of industry not very abun
dant, was not altogether so scanty. It con
sisted in Indian corn, yams, potatoes, bananes,
&c. plants which were then altogether unknown
in Europe, and which have never since been
very much esteemed in it, or supposed to yield
a sustenance equal to what is drawn from the
common sorts of grain and pulse, which have
been cultivated in this part of the world time
out of mind.

The cotton plant indeed afforded the material
of a very important manufacture, and was at
that time to Europeans undoubtedly the most
valuable of all the vegetable productions of those
islands. But though in the end of the fifteenth
century, the muslins and other cotton goods of
the East Indies were much esteemed in every
part of Europe, the cotton manufacture itself
was not cultivated in any part of it. Even this
production, therefore, could not at that time
appear in the eyes of Europeans to be of very
great consequence.

Finding nothing either in the animals or vege
tables of the newly discovered countries, which
could justify a very advantageous representation
of them, Columbus turned his view towards
their minerals ; and in the richness of their pro
ductions of this third kingdom, he flattered him
self, he had found a full compensation for the
insignificancy of those of the other two. The

352 THE NATURE AND CAUSES OF BOOK IV.

little bits of gold with which the inhabitants orna
mented their dress, and which, he was informed,
they frequently found in the rivulets and tor
rents that fell from the mountains, were suf
ficient to satisfy him that those mountains
abounded with the richest gold mines. St. Do
mingo, therefore, was represented as a coun
try abounding with gold, and, upon that ac
count (according to the prejudices not only of
the present times, but of those times), an inex
haustible source of real wealth to the crown and
kingdom of Spain. When Columbus, upon his
return from his first voyage, was introduced with
a sort of triumphal honours to the sovereigns of
Castile and Arragon, the principal productions
of the countries which he had discovered were
carried in solemn procession before him. The
only valuable part of them consisted in some little
fillets, bracelets, and other ornaments of gold,
and in some bales of cotton. The rest were
mere objects of vulgar wonder and curiosity ;
some reeds of an extraordinary size, some birds
of a very beautiful plumage, and some stuffed
skins of the huge alligator and manati ; all of
which were preceded by six or seven of the
wretched natives, whose singular colour and ap
pearance added greatly to the novelty of the show.
In consequence of the representations of Co
lumbus, the council of Castile determined to take
possession of countries of which the inhabitants
were plainly incapable of defending themselves.
The pious purpose of converting them to Christi
anity sanctified the injustice of the project. But

CHAP. Y1I. THE WEALTH OF NATIONS. 953

the hope of finding treasures of gold there, was
the sole motive which prompted to undertake it ;
and to give this motive the greater weight, it
was proposed by Columbus that the half of all the
gold and silver that should be found there should
belong to the crown. This proposal was approved
of by the council.

As long as the whole or the greater part of
the gold, which the first adventurers imported
into Europe, was got by so very easy a method
as the plundering of the defenceless natives, it
was not perhaps very difficult to pay even this
heavy tax. But when the natives were once
fairly stript of all that they had, which, in St.
Domingo, and in all the other countries dis
covered by Columbus, was done completely in
six or eight years, and when in order to find
more it had become necessary to dig for it in the
mines, there was no longer any possibility of
paying this tax. The rigorous exaction of it,
accordingly, first occasioned, it is said, the total
abandoning of the mines of St. Domingo, which
have never been wrought since. It was soon re
duced therefore to a third ; then to a fifth ; after
wards to a tenth ; and at last to a twentieth part
of the gross produce of the gold mines. The
tax upon silver continued for a long time to be
a fifth of the gross produce. It was reduced to
a tenth only in the course of the present century.
But the first adventurers do not appear to have
been much interested about silver. Nothing less
precious than gold seemed worthy of their atten
tion.

VOL. II. A A

THE NATURE AND CAUSES OF BOOK I>,

All the other enterprises of the Spaniards in
the new world, subsequent to those of Colum
bus, seem to have been prompted by the same
motive. It was the sacred thirst of gold that
carried Oieda, Nicuessa, and Vasco Nugnes de
Balboa, to the isthmus of Darien, that carried
Cortez to Mexico, and Almagro and Pizarro to
Chili and Peru. When those adventurers ar
rived upon any unknown coast, their first inquiry
was always if there was any gold to be found
there ; and according to the information which
they received concerning this particular, they
determined either to quit the country or to
settle in it.

Of all those expensive and uncertain projects,
however, which bring bankruptcy upon the
greater part of the people who engage in them,
there is none perhaps more perfectly ruinous
than the search after new silver and gold mines.
It is perhaps the most disadvantageous lottery in
the world, or the one in which the gain of those
who draw the prizes bears the least proportion
to the loss of those who draw the blanks : for
though the prizes are few and the blanks many,
the common price of a ticket is the whole for
tune of a very rich man. Projects of mining,
instead of replacing the capital employed in
them, together with the ordinary profits of stock,
commonly absorb both capital and profit. They
are the projects, therefore, to which of all others
a prudent law-giver, who desired to increase the
capital of his nation, would least choose to give
any extraordinary encouragement, or to turn to-

CHAP. VII. THE WEALTH OF NATIONS. 355

wards them a greater share of that capital than
what would go to them of its own accord.
Such in reality is the absurd confidence which
almost all men have in their own good fortune,
that wherever there is the least probability of
success, too great a share of it is apt to go to
them of its own accord.

But though the judgment of sober reason and
experience concerning such projects has always
been extremely unfavourable, that of human avi
dity has commonly been quite otherwise. The
same passion which has suggested to so many
people the absurd idea of the philosopher's stone,
has suggested to others the equally absurd
one of immense rich mines of gold and silver.
They did not consider that the value of those
metals has, in all ages and nations, arisen chiefly
from their scarcity, and that their scarcity
has arisen from the very small quantities of
them which nature has any where deposited in
one place, from the hard and intractable sub
stances with which she has almost every where
surrounded those small quantities, and conse
quently from the labour and expense which are
every where necessary in order to penetrate to
and get at them. They flattered themselves
that veins of those metals might in many places
be found as large and as abundant as those which
are commonly found of lead, or copper, or tin,
or iron. The dream of Sir Walter Raleigh con
cerning the golden city and country of Eldorado,
may satisfy us, that even wise men are not al
ways exempt from such strange delusions. More

A A 2

856 THE NATURE AND CAUSES OF HOOK IV.

than a hundred years after the death of that great
man, the Jesuit Gumila was still convinced of
the reality of that wonderful country, and ex
pressed with great warmth, and, I dare to say
with great sincerity, how happy he should be to
carry the light of the gospel to a people who
could so well reward the pious labours of their
missionary.

In the countries first discovered by the Spa
niards, no gold and silver mines are at present
known which are supposed to be worth the work-
ing. The quantities of those metals which the
first adventurers are said to have found there, had
probably been very much magnified, as well as
the fertility of the mines which were wrought im
mediately after the first discovery. What those
adventurers were reported to have found, how
ever, was sufficient to inflame the avidity of all
their countrymen. Every Spaniard who sailed to
America expected to find an Eldorado. Fortune
too did upon this what she has done upon very
few other occasions. She realised in some mea
sure the extravagant hopes of her votaries, and
in the discovery and conquest of Mexico and
Peru (of which the one happened about thirty,
the other about forty years after the first expe
dition of Columbus), she presented them with
something not very unlike that profusion of the
precious metals which they sought for.

A project of commerce to the East Indies,
therefore, gave occasion to the first discovery of
the West. A project of conquest gave occasion
to all the establishments of the Spaniards in those

CHAP. VII. THE WEALTH OF NATIONS. 357

newly-discovered countries. The motive which
excited them to this conquest was a project of
gold and silver mines; and a course of acci
dents, which no human wisdom could foresee,
rendered this project much more successful than
the undertakers had any reasonable grounds for
expecting.

The first adventurers of all the other nations
of Europe, who attempted to make settlements
in America, were animated by the like chimeri
cal views; but they were not equally success
ful. It was more than a hundred years after the
first settlement of the Brazils before any silver,
gold, or diamond mines were discovered there.
In the English, French, Dutch, and Danish co
lonies, none have ever yet been discovered; at
least none that are at present supposed to be
worth the working. The first English settlers
in North America, however, offered a fifth of all
the gold and silver which should be found there
to the king, as a motive for granting them their
patents. In the patents to Sir Walter Raleigh,
to the London and Plymouth companies, to the
council of Plymouth, &c. this fifth was accord
ingly reserved to the crown. To the expecta
tion of finding gold and silver mines, those first
settlers too joined that of discovering a north
west passage to the East Indies. They have
hitherto been disappointed in both.

358 THE NATURE AND CAUSES OF BOOK IV.

PART II.

Causes of the Prosperity of new Colonies.

THE colony of a civilized nation which takes
possession, either of a waste country, or of one
so thinly inhabited that the natives easily give
place to the new settlers, advances more rapidly
to wealth and greatness than any other human
society.

The colonists carry out with them a know
ledge of agriculture and of other useful arts,
superior to what can grow up of its own accord
in the course of many centuries among savage
and barbarous nations. They carry out with
them too the habit of subordination, some no
tion of the regular government which takes
place in their own country, of the system of laws
which supports it, and of a regular administra
tion of justice; and they naturally establish
something of the same kind in the new settle
ment. But among savage and barbarous na
tions, the natural progress of law and govern
ment is still slower than the natural progress of
arts, after law and government have been so far
established, as is necessary for their protection.
Every colonist gets more land than he can pos
sibly cultivate. He has no rent, and scarce any
taxes to pay. No landlord shares with him in
its produce, and the share of the sovereign is
commonly but a trifle. He has every motive to
render as great as possible a produce, which is

CHAP. VI r. THE WEALTH OF NATIONS. 359

thus to be almost entirely his own. But his land
is commonly so extensive, that, with all his own
industry, and with all the industry of other
people whom he can get to employ, he can sel
dom make it produce the tenth part of what it
is capable of producing. He is eager, therefore,
to collect labourers from all quarters, and to re
ward them with the most liberal wages. But
those liberal wages, joined to the plenty and
cheapness of land, soon make those labourers
leave him, in order to become landlords them
selves, and to reward, with equal liberality,
other labourers, who soon leave them for the
same reason that they left their first master.
The liberal reward of labour encourages mar
riage. The children, during the tender years
of infancy, are well fed and properly taken care
of, and when they are grown up, the value of
their labour greatly overpays their maintenance.
When arrived at maturity, the high price of la
bour, and the low price of land, enable them to
establish themselves in the same manner as their
fathers did before them.

In other countries rent and profit eat up
wages, and the two superior orders of people
oppress the inferior one. But in new colonies,
the interest of the two superior orders obliges
them to treat the inferior one with more gene
rosity and humanity; at least, where that in
ferior one is not in a state of slavery. Waste
lands of the greatest natural fertility, are to be
had for a trifle. The increase of revenue which
the proprietor, who is always the undertaker,

360 THE NATURE AND CAUSES OF BOOK IV.

expects from their improvement, constitutes his
profit; which in these circumstances is com
monly very great. But this great profit cannot
be made without employing the labour of other
people in clearing and cultivating the land; and
the disproportion between the great extent of
the land and the small number of the people,
which commonly takes place in new colonies,
makes it difficult for him to get this labour. He
does not, therefore, dispute about wages, but is
willing to employ labour at any price. The
high wages of labour encourage population.
The cheapness and plenty of good land en
courage improvement, and enable the proprietor
to pay those high wages. In those wages con
sists almost the whole price of the land; and
though they are high, considered as the wages
of labour, they are low, considered as the price
of what is so very valuable. What encourages
the progress of population and improvement,
encourages that of real wealth and greatness.

The progress of many of the ancient Greek
colonies towards wealth and greatness, seems
accordingly to have been very rapid. In the
course of a century or two, several of them ap
pear to have rivalled, and even to have sur
passed, their mother cities. Syracuse and Agri-
gentum in Sicily, Tarentum and Locri in Italy,
Ephesus and Miletus in Lesser Asia, appear by
all accounts to have been at least equal to any of
the cities of ancient Greece. Though posterior
in their establishment, yet all the arts of refine
ment, philosophy, poetry, and eloquence, seem

CHAP. vii. THE WEALTH OF NATIONS. 361

to have been cultivated as early, and to have
been improved as highly in them, as in any part
of the mother country. The schools of the two
oldest Greek philosophers, those of Thales and
Pythagoras, were established, it is remarkable,
not in ancient Greece, but the one in an Asiatic,
the other in an Italian colony. All those colo
nies had established themselves in countries in
habited by savage and barbarous nations, who
easily gave place to the new settlers. They
had plenty of good land, and as they were alto
gether independent of the mother city, they
were at liberty to manage their own affairs in
the way that they judged was most suitable to
their own interest.

The history of the Roman colonies is by no
means so brilliant. Some of them, indeed, such
as Florence, have in the course of many ages,
and after the fall of the mother city, grown up
to be considerable states. But the progress of
no one of them seems ever to have been very
rapid. They were all established in conquered
provinces, which in most cases had been fully
inhabited before. The quantity of land assigned
to each colonist was seldom very considerable,
and as the colony was not independent, they
were not always at liberty to manage their own
affairs in the way that they judged was most
suitable to their own interest.

In the plenty of good land, the European
colonies established in America and the West
Indies resemble, and even greatly surpass, those
of ancient Greece. In their dependency upon

362 THK NATURE AND CAUSES OF BOOK IV.

the mother state, they resemble those of ancient
Rome; but their great distance from Europe has
in all of them alleviated more or less the effects
of this dependency. Their situation has placed
them less in the view and less in the power of
their mother country. In pursuing their interest
their own way, their conduct has, upon many
occasions, been overlooked, either because not
known or not understood in Europe ; and upon
some occasions it has been fairly suffered and
submitted to, because their distance rendered
it difficult to restrain it. Even the violent and
arbitrary government of Spain has, upon many
occasions, been obliged to recall or soften the
orders which had been given for the govern
ment of her colonies, for fear of a general in
surrection. The progress of all the European
colonies in wealth, population, and improve
ment, has accordingly been very great.

The crown of Spain, by its share of the gold
and silver, derived some revenue from its colo
nies, from the moment of their first establish
ment. It was a revenue too, of a nature to
excite in human avidity the most extravagant
expectation of still greater riches. The Spanish
colonies, therefore, from the moment of their
first establishment, attracted very much the at
tention of their mother country ; while those of
the other European nations were for a long time
in a great measure neglected. The former did
not, perhaps, thrive the better in consequence of
this attention ; nor the latter the worse in con
sequence of this neglect. In proportion to the

CHAP. Vll. THE WEALTH OF NATIONS. 363

extent of the country which they in some mea
sure possess, the Spanish colonies are considered
as less populous and thriving than those of almost
any other European nation. The progress even
of the Spanish colonies, however, in population
and improvement, has certainly been very rapid
and very great. The city of Lima, founded
since the conquest, is represented by Ulloa, as
containing fifty thousand inhabitants near thirty
years ago. Quito, which had been but a mi
serable hamlet of Indians, is represented by the
same author as in his time equally populous.
Gemelli Carreri, a pretended traveller, it is said,
indeed, but who seems every where to have
written upon extreme good information, repre
sents the city of Mexico as containing a hundred
thousand inhabitants ; a number which, in spite
of all the exaggerations of the Spanish writers,
is, probably, more than five times greater than
what it contained in the time of Montezuma.
These numbers exceed greatly those of Boston,
New York, and Philadelphia, the three greatest
cities of the English colonies. Before the con
quest of the Spaniards there were no cattle fit
for draught either in Mexico or Peru. The
lama was their only beast of burden, and its
strength seems to have been a good deal inferior
to that of a common ass. The plough was un
known among them. They were ignorant of
the use of iron. They had no coined money,
nor any established instrument of commerce of
any kind. Their commerce was carried on by
barter. A sort of wooden spade was their prin-

364 THE NATURE AND CAUSES OF BOOK IV.

cipal instrument of agriculture. Sharp stones
served them for knives and hatchets to cut with ;
fish bones and the hard sinews of certain animals
served them for needles to sew with; and these
seem to have been their principal instruments of
trade. In this state of things, it seems impos
sible that either of those empires could have been
so much improved or so well cultivated as at
present, when they are plentifully furnished with
all sorts of European cattle, and when the use
of iron, of the plough, and of many of the arts
of Europe, has been introduced among them.
But the populousness of every country must be
in proportion to the degree of its improvement
and cultivation. In spite of the cruel destruc
tion of the natives which followed the conquest,
these two great empires are, probably, more po
pulous now than they ever were before : and
the people are surely very different ; for we must
acknowledge, I apprehend, that the Spanish
Creoles are in many respects superior to the
ancient Indians.

After the settlements of the Spaniards, that
of the Portuguese in Brazil is the oldest of any
European nation in America. But as for a long
time after the first discovery, neither gold nor
silver mines were found in it, and as it afforded,
upon that account, little or no revenue to the
crown, it was for a long time in a great measure
neglected ; and during this state of neglect, it
grew up to be a great and powerful colony.
While Portugal was under the dominion of
Spain, Brazil was attacked by the Dutch, who

CHAP. Vll. THE WEALTH OF NATIONS. 365

got possession of seven of the fourteen provinces
into which it is divided. They expected soon
to conquer the other seven, when Portugal re
covered its independency by the elevation of the
family of Braganza to the throne. The Dutch
then, as enemies to the Spaniards, became
friends to the Portuguese, who were likewise the
enemies of the Spaniards. They agreed, there
fore, to leave that part of Brazil, which they
had not conquered, to the king of Portugal,
who agreed to leave that part which they had
conquered to them, as a matter not worth dis
puting about with such good allies. But the
Dutch government soon began to oppress the
Portuguese colonists, who, instead of amusing
themselves with complaints, took arms against
their new masters, and by their own valour and
resolution, with the connivance, indeed, but
without any avowed assistance from the mother
country, drove them out of Brazil. The Dutch
therefore, finding it impossible to keep any part
of the country to themselves, were contented
that it should be entirely restored to the crown
of Portugal. In this colony there are said to be
more than six hundred thousand people, either
Portuguese, or descended from Portuguese,
Creoles, mulattoes, and a mixed race between
Portuguese and Brazilians. No one colony in
America is supposed to contain so great a num
ber of people of European extraction.

Towards the end of the fifteenth, and during
the greater part of the sixteenth century, Spain
and Portugal were the two great naval powers

366 THE NATURE AND CAUSES OF BOOK IV.

upon the ocean ; for though the commerce of
Venice extended to every part of Europe, its
fleet had scarce ever sailed beyond the Mediter
ranean. The Spaniards, in virtue of the first dis
covery, claimed all America as their own ; and
though they could not hinder so great a naval
power as that of Portugal from settling in Brazil,
such was, at that time, the terror of their name,
that the greater part of the other nations of
Europe were afraid to establish themselves in any
other part of that great continent. The French,
who attempted to settle in Florida, were all
murdered by the Spaniards. But the declension
of the naval power of this latter nation, in con
sequence of the defeat or miscarriage of what
they called their Invincible Armada, which hap
pened towards the end of the sixteenth century,
put it out of their power to obstruct any longer
the settlements of the other European nations.
In the course of the seventeenth century, there
fore, the English, French, Dutch, Danes, and
Swedes, all the great nations who had any ports
upon the ocean, attempted to make some settle
ments in the new world.

The Swedes established themselves in New
Jersey ; and the number of Swedish families still
to be found there, sufficiently demonstrates, that
this colony was very likely to prosper, had it
been protected by the mother country. But
being neglected by Sweden, it was soon swal
lowed up by the Dutch colony of New York,
which again, in 1674, fell under the dominion
of the English.

CHAP. VII. THE WEALTH OF NATIONS. 367

The small islands of St. Thomas and Santa
Cruz are the only countries in the new world
that have ever been possessed by the Danes.
These little settlements too were under the go
vernment of an exclusive company, which had
the sole right, both of purchasing the surplus
produce of the colonists, and of supplying them
with such goods of other countries as they
wanted, and which, therefore, both in its pur
chases and sales, had not only the power of op
pressing them, but the greatest temptation to do
so. The government of an exclusive company
of merchants is, perhaps, the worst of all go
vernments for any country whatever. It was
not, however, able to stop altogether the pro
gress of these colonies, though it rendered it
more slow and languid. The late king of Den
mark dissolved this company, and since that
time the prosperity of these colonies has been
very great.

The Dutch settlements in the West, as well
as those in the East Indies, were originally put
under the government of an exclusive company.
The progress of some of them, therefore, though
it has been considerable in comparison with that
of almost any country that has been long peopled
and established, has been languid and slow in
comparison with that of the greater part of new
colonies. The colony of Surinam, though very
considerable, is still inferior to the greater part
of the sugar colonies of the other European na
tions. The colony of Nova Belgia, now divided
into the two provinces of New York and New

368 THE NATURE AND CAUSES OF BOOK IV.

Jersey, would probably have soon become con
siderable too, even though it had remained
under the government of the Dutch. The
plenty and cheapness of good land are such
powerful causes of prosperity, that the very
worst government is scarce capable of checking
altogether the efficacy of their operation. The
great distance too from the mother country
would enable the colonists to evade more or
less, by smuggling, the monopoly which the
company enjoyed against them. At present
the company allows all Dutch ships to trade to
Surinam upon paying two and a half per cent,
upon the value of their cargo for a licence ; and
only reserves to itself exclusively the direct trade
from Africa to America, which consists almost
entirely in the slave trade. This relaxation in
the exclusive privileges of the company, is pro
bably the principal cause of that degree of pro
sperity which that colony at present enjoys. Cu-
ra9oa and Eustatia, the two principal islands be.
longing to the Dutch, are free ports open to the
ships of all nations ; and this freedom, in the midst
of better colonies whose ports are open to those
of one nation only, has been the great cause of
the prosperity of those two barren islands.

The French colony of Canada was, during
the greater part of the last century, and some
part of the present, under the government of an
exclusive company. Under so favourable an
administration its progress was necessarily very
slow in comparison with that of other new colo
nies ; but it became much more rapid when this

CHAP. vn. THE WEALTH OF NATIONS. 369

company was dissolved after the fall of what
is called the Mississippi scheme* When the
English got possession of this country, they
found in it near double the number of inhabit
ants which father Charlevoix had assigned to it
between twenty and thirty years before. That
Jesuit had travelled over the whole country, and
had no inclination to represent it as less con
siderable than it really was.

The French colony of St. Domingo, was esta
blished by pirates and free-booters, who, for a
long time, neither required the protection, nor
acknowledged the authority of France ; and
when that race of banditti became so far citizens
as to acknowledge this authority, it was for a
long time necessary to exercise it with very great
gentleness. During this period the population
and improvement of this colony increased very
fast. Even the oppression of the exclusive com
pany, to which it was for some time subjected,
with all the other colonies of France, though
it no doubt retarded, had not been able to stop
its progress altogether. The course of its pro
sperity returned as soon as it was relieved from
that oppression. It is now the most important
of the sugar colonies of the West Indies, and its
produce is said to be greater than that of all the
English sugar colonies put together. The other
sugar colonies of France are in general all very
thriving.

But there are no colonies of which the pro
gress has been more rapid than that of the
English in North America.

VOL. II. B B

370 THE NATURE AND CAUSES OF BOOK IV.

Plenty of good land, and liberty to manage
their own affairs their own way, seem to be the
two great causes of the prosperity of all new
colonies.

In the plenty of good land the English colo
nies of North America, though, no doubt, very
abundantly provided, are, however, inferior to
those of the Spaniards and Portuguese, and not
superior to some of those possessed by the French
before the late war. But the political institu
tions of the English colonies have been more
favourable to the improvement and cultivation
of this land, than those of any of the other
three nations.

First, the engrossing of uncultivated land,
though it has by no means been prevented alto
gether, has been more restrained in the English
^colonies than in any other. The colony law
which imposes upon every proprietor the obli
gation of improving and cultivating, within a
limited time, a certain proportion of his lands,
and which, in case of failure, declares those
neglected lands grantable to any other person ;
though it has not, perhaps, been very strictly
executed, has, however, had some effect.

Secondly, in Pennsylvania there is no right
of primogeniture, and lands, like moveables,
are divided equally among all the children
of the family. In three of the provinces of
New England the oldest has only a double
share, as in the Mosaical law. Though in
those provinces, therefore, too great a quan
tity of land should sometimes be engrossed by a

CHAP. VII. THE WEALTH OF NATIONS. 371

particular individual, it is likely, in the course
of a generation or two, to be sufficiently divided
again. In the other English colonies, indeed,
the right of primogeniture takes place, as in the
law of England. But in all the English colonies
the tenure of the lands, which are all held by
free soccage, facilitates alienation, and the grantee
of any extensive tract of land, generally finds it
for his interest to alienate, as fast as he can, the
greater part of it, reserving only a small quit-
rent. In the Spanish and Portuguese colonies,
what is called the right of Majorazzo * takes
place in the succession of all those great estates
to which any title of honour is annexed. Such
estates go all to one person, and are in effect en
tailed and unalienable. The French colonies, in
deed, are subject to the custom of Paris, which,
in the inheritance of land, is much more favour
able to the younger children than the law of
England. But, in the French colonies, if any
part of an estate, held by the noble tenure of
chivalry and homage, is alienated, it is, for a
limited time, subject to the right of redemption,
either by the heir of the superior, or by the heir
of the family ; and all the largest estates of the
country are held by such noble tenures, which
necessarily embarrass alienation. But, in a new
colony, a great uncultivated estate is likely to be
much more speedily divided by alienation thap
by succession. The plenty and cheapness of
good land, it has already been observed, are the
principal causes of the rapid prosperity of new
* Jus Majoratus.

B B 2

THE NATURE AND CAUSES OF BOOK IV.

colonies. The engrossing of land, in effect, de
stroys this plenty and cheapness. The engrossing
of uncultivated land, besides, is the greatest ob
struction to its improvement. But the labour
that is employed in the improvement and cultiva
tion of land affords the greatest and most valua
ble produce to the society. The produce of la
bour, in this case, pays not only its own wages
and the profit of the stock which employs it, but
the rent of the land too upon which it is em
ployed. The labour of the English colonists,
therefore, being more employed in the improve
ment and cultivation of land, is likely to afford
a greater and more valuable produce, than that
of any of the other three nations, which, by the
engrossing of land, is more or less diverted to
wards other employments.

Thirdly, the labour of the English colonists
is not only likely to afford a greater and more
valuable produce, but, in consequence of the
moderation of their taxes, a greater proportion
of this produce belongs to themselves, which
they may store up and employ in putting into
motion a still greater quantity of labour. The
English colonists have never yet contributed any
thing towards the defence of the mother coun
try, or towards the support of its civil govern
ment. They themselves, on the contrary, have
hitherto been defended almost entirely at the
expense of the mother country. But the ex
pense of fleets and armies is out of all propor
tion greater than the necessary expense of civil
government. The expense of their own civil

CHAP. VII. THE WEALTH OF NATIONS. 373

government has always been very moderate. It
has generally been confined to what was neces
sary for paying competent salaries to the gover
nor, to the judges, and to some other officers of
police, and for maintaining a few of the most
useful public works. The expense of the civil
establishment of Massachusetts Bay, before the
commencement of the present disturbances, used
to be but about 18,0007. a year. That of New
Hampshire and Rhode Island 3,5007. each.
That of Connecticut, 4,0007. That of New
York and Pennsylvania, 4>,500L each. That of
New Jersey 1,2007. That of Virginia and South
Carolina 8,0007. each. The civil establishments
of Nova Scotia and Georgia are partly supported
by an annual grant of parliament. But Nova
Scotia pays, besides, about 7,0007. a year towards
the public expenses of the colony ; and Georgia
about 2,5007. a year. All the different civil
establishments in North America, in short, ex
clusive of those of Maryland and North Caro
lina, of which no exact account has been got,
did not, before the commencement of the present
disturbances, cost the inhabitants above 64,7007.
a year; an ever-memorable example at how
small an expense three millions of people may
not only be governed, but well governed. The
most important part of the expense of govern
ment, indeed, that of defence and protection,
has constantly fallen upon the mother country.
The ceremonial too of the civil government in
the colonies, upon the reception of a new go
vernor, upon the opening of a new assembly, &c.

374 THE NATURE AND CAUSES OF BOOK IV.

though sufficiently decent, is not accompanied
with any expensive pomp or parade. Their ec
clesiastical government is conducted upon a plan
equally frugal. Tithes are unknown among
them; and their clergy, who are far from being
numerous, are maintained either by moderate
stipends, or by the voluntary contributions of the
people. The power of Spain and Portugal, on
the contrary, derives some support from the taxes
levied upon their colonies. France, indeed, has
never drawn any considerable revenue from its
colonies, the taxes which it levies upon them
being generally spent among them. But the
colony government of all these three nations is
conducted upon a much more expensive plan, and
is accompanied with a much more expensive cere
monial. The sums spent upon the reception of
a new viceroy of Peru, for example, have fre
quently been enormous. Such ceremonials are
not only real taxes paid by the rich colonists
upon those particular occasions, but they serve
to introduce among them the habit of vanity and
expense upon all other occasions. They are not
only very grievous occasional taxes, but they
contribute to establish perpetual taxes of the
same kind still more grievous ; the ruinous taxes
of private luxury and extravagance. In the co
lonies of all those three nations too, the ecclesias
tical government is extremely oppressive. Tithes
take place in all of them, and are levied with the
utmost rigour in those of Spain and Portugal.
All of them besides are oppressed with a nume
rous race of mendicant friars, whose beggary

CHAP. VII. THE WEALTH OF NATIONS. 3?5

being not only licensed, but consecrated by reli
gion, is a most grievous tax upon the poor
people, who are most carefully taught that it is
a duty to give, and a very great sin to refuse
them their charity. Over and above all this, the
clergy are, in all of them, the greatest engrossers
of land.

Fourthly, in the disposal of their surplus
produce, or of what is over and above their own
consumption, the English colonies have been
more favoured, and have been allowed a more
extensive market, than those of any other Euro
pean nation. Every European nation has endea
voured more or less to monopolize to itself the
commerce of its colonies, and, upon that ac
count, has prohibited the ships of foreign na
tions from trading to them, and has prohibited
them from importing European goods from any
foreign nation. But the manner in which this
monopoly has been exercised in different nations
has been very different.

Some nations have given up the whole com
merce of their colonies to an exclusive company,
of whom the colonies were obliged to buy all
such European goods as they wanted, and to
whom they were obliged to sell the whole of
their own surplus produce. It was the interest
of the company, therefore, not only to sell the
former as dear, and to buy the latter as cheap as
possible, but to buy no more of the latter, even
at this low price, than what they could dispose of
for a very high price in Europe. It was their
interest not only to degrade in all cases the va-

376 THE NATURE AND CAUSES OF BOOK iv.

lue of the surplus produce of the colony, but in
many cases to discourage and keep down the na
tural increase of its quantity. Of all the ex
pedients that can well be contrived to stunt the
natural growth of a new colony, that of an ex
clusive company is undoubtedly the most ef
fectual. This, however, has been the policy of
Holland, though their company, in the course of
the present century, has given up in many re
spects the exertion of their exclusive privilege.
This too was the policy of Denmark till the
reign of the late king. It has occasionally been
the policy of France, and of late, since 17^5,
after it had been abandoned by all other nations,
on account of its absurdity, it has become the
policy of Portugal with regard at least to two of
the principal provinces of Brasil, Fernambuco,
and Marannon.

Other nations, without establishing an exclu
sive company, have confined the whole com
merce of their colonies to a particular port of
the mother country, from whence no ship was
allowed to sail, but either in a fleet and at a par
ticular season, or, if single, in consequence of a
particular licence, which in most cases was very
well paid for. This policy opened, indeed, the
trade of the colonies to all the natives of the
mother country, provided they traded from the
proper port, at the proper season, and in the
proper vessels. But as all the different mer
chants, who joined their stocks in order to fit
out those licensed vessels, would find it for their
interest to act in concert, the trade which was

CHAP. VII. THE WEALTH OF NATIONS. 577

carried on in this manner would necessarily be
conducted very nearly upon the same principles
as that of an exclusive company. The profit of
those merchants would be almost equally exorbi
tant and oppressive. The colonies would be ill
supplied, and would be obliged both to buy very
dear, and to sell very cheap. This, however,
till within these few years, had always been the
policy of Spain, and the price of all European
goods, accordingly, is said to have been enor
mous in the Spanish West Indies. At Quito,
we are told by Ulloa, a pound of iron sold for
about four and six-pence, and a pound of steel
for about six and nine-pence sterling. But it is
chiefly in order to purchase European goods,
that the colonies part with their own produce.
The more, therefore, they pay for the one, the
less they really get for the other, and the dear-
ness of the one is the same thing with the cheap
ness of the other. The policy of Portugal is in
this respect the same as the ancient policy of
Spain, with regard to all its colonies, except
Fernambuco and Marannon, and with regard to
these it has lately adopted a still worse.

Other nations leave the trade of their colo
nies free to all their subjects, who may carry it
on from all the different ports of the mother
country, and who have occasion for no other
licence than the common despatches of the
custom-house. In this case the number and dis
persed situation of the different traders renders
it impossible for them to enter into any general
combination, and their competition is sufficient

378 THE NATURE AND CAUSES OF BOOK IY.

to hinder them from making very exorbitant
profits. Under so liberal a policy the colonies
are enabled both to sell their own produce and
to buy the goods of Europe at a reasonable price.
But since the dissolution of the Plymouth com
pany, when our colonies were but in their in
fancy, this has always been the policy of England.
It has generally too been that of France, and has
been uniformly so since the dissolution of what,
in England, is commonly called their Mississippi
company. The profits of the trade, therefore,
which France and England carry on with their
colonies, though no doubt somewhat higher than
if the competition were free to all other nations,
are, however, by no means exorbitant; and the
price of European goods accordingly is not ex
travagantly high in the greater part of the co
lonies of either of those nations.

In the exportation of their own surplus pro
duce too, it is only with regard to certain com
modities that the colonies of Great Britain are
confined to the market of the mother country.
These commodities having been enumerated in
the act of navigation and in some other sub
sequent acts, have upon that account been
called enumerated commodities. The rest are
called non-enumerated; and may be exported
directly to other countries, provided it is in
British or Plantation ships, of which the owners
and three-fourths of the mariners are British
subjects.

Among the non-enumerated commodities are
some of the most important productions of Ame-

CHAP. VII. THE WEALTH OF NATIONS. 379

rica and the West Indies ; grain of all sorts, lum
ber, salt provisions, fish, sugar, and rum.

Grain is naturally the first and principal ob
ject of the culture of all new colonies. By al
lowing them a very extensive market for it, the
law encourages them to extend this culture
much beyond the consumption of a thinly in
habited country, and thus to provide before-
haiad an ample subsistence for a continually in
creasing population.

In a country quite covered with wood, where
timber consequently is of little or no value, the
expense of clearing the ground is the principal
obstacle to improvement. By allowing the co
lonies a very extensive market for their lumber,
the lav/ endeavours to facilitate improvement by
raising the price of a commodity which would
otherwise be of little value, and thereby ena
bling them to make some profit of what would
otherwise be mere expense.

In a country neither half-peopled nor half-
cultivated, cattle naturally multiply beyond the
consumption of the inhabitants, and are often
upon that account of little or no value. But it
is necessary, it has already been shown, that the
price of cattle should bear a certain proportion
to that of corn, before the greater part of the
lands of any country can be improved. By al
lowing to American cattle, in all shapes, dead
and alive, a very extensive market, the law en-
deavours to raise the value of a commodity of
which the high price is so very essential to im
provement. The good effects of this liberty,

380 THE NATURE AND CAUSES OF BOOK IV.

however, must be somewhat diminished by the
4th of George III. c. 15. which puts hides and
skins among the enumerated commodities, and
thereby tends to reduce the value of American
cattle.

To increase the shipping and naval power of
Great Britain, by the extension of the fisheries
of our colonies, is an object which the legislature
seems to have had almost conatantly in view.
Those fisheries, upon this account, have had all
the encouragement which freedom can give
them, and they have flourished accordingly.
The New England fishery in particular was, be
fore the late disturbances, one of the most im
portant, perhaps, in the world. The whale-
fishery, which, notwithstanding an extravagant
bounty, is in Great Britain carried on to so little
purpose, that in the opinion of many people
(which I do not however pretend to warrant)
the whole produce does not much exceed the
value of the bounties which are annually paid
for it, is in New England carried on without
any bounty to a very great extent. Fish is one
of the principal articles with which the North
Americans trade to Spain, Portugal, and the
Mediterranean.

Sugar was originally an enumerated commo
dity which could be exported only to Great Bri
tain. But in 1731, upon a representation of the
sugar-planters, its exportation was permitted to
all parts of the world. The restrictions, how
ever, with which this liberty was granted, joined
to the high price of sugar in Great Britain, have

CHAP. VII. THE WEALTH OF NATIONS. 381

rendered it, in a great measure, ineffectual.
Great Britain and her colonies still continue to
be almost the sole market for all the sugar pro
duced in the British plantations. Their con
sumption increases so fast, that, though in conse
quence of the increasing improvement of Jamaica,
as well as of the ceded islands, the importation
of sugar has increased very greatly within these
twenty years, the exportation to foreign countries
is said to be not much greater than before.

Rum is a very important article in the trade
which the Americans carry on to the coast of
Africa, from which they bring back negro
slaves in return.

If the whole surplus produce of America in
grain of all sorts, in salt provisions, and in fish,
had been put into the enumeration, and thereby
forced into the market of Great Britain, it would
have interfered too much with the produce of the
industry of our own people. It was probably
not so much from any regard to the interest of
America, as from a jealousy of this interference,
that those important commodities have not only
been kept out of the enumeration, but that the
importation into Great Britain of all grain, ex
cept rice, and of all salt provisions, has, in the
ordinary state of the law, been prohibited.

The non-enumerated commodities could ori
ginally be exported to all parts of the world.
Lumber and rice, having been once put into the
enumeration, when they were afterwards taken
out of it, were confined, as to the European
market, to the countries that lie south of Cape

382 THE NATURE AND CAUSES OF BOOK IV.

Finisterre. By the 6th of George III. c. 52. all
non-enumerated commodities were subjected to
the like restriction. The parts of Europe which
lie south of Cape Finisterre, are not manufac
turing countries, and we were less jealous of the
colony ships carrying home from them any ma
nufactures which could interfere with our own.
The enumerated commodities are of two sorts :
first, such as are either the peculiar produce of
America, or as cannot be produced, or at least
are not produced, in the mother country. Of
this kind are, molasses, coffee, cocoa-nuts, to
bacco, pimento, ginger, whale-fins, raw silk,
cotton-wool, beaver, and other peltry of Ame
rica, indigo, fustic, and other dying woods :
secondly, such as are not the peculiar produce of
America, but which are and may be produced in
the mother country, though not in such quanti
ties as to supply the greater part of her demand,
which is principally supplied from foreign coun
tries. Of this kind are all naval stores, masts,
yards, and bowsprits, tar, pitch, and turpentine,
pig and bar iron, copper ore, hides and skins,
pot and pearl ashes. The largest importation of
commodities of the first kind could not discourage
the growth, or interfere with the sale, of any part
of the produce of the mother country. By con
fining them to the home market, our merchants,
it was expected, would not only be enabled to
buy them cheaper in the Plantations, and con
sequently to sell them with a better profit at
home, but to establish between the Plantations
and foreign countries an advantageous carrying

CHAP. VII. THE WEALTH OF NATIONS. 883

trade, of which Great Britain was necessarily to
be the centre or emporium, as the European
country into which those commodities were
first to be imported. The importation of com
modities of the second kind might be so ma
naged too, it was supposed, as to interfere, not
with the sale of those of the same kind which
were produced at home, but with that of those
which were imported from foreign countries ;
because, by means of proper duties, they might
be rendered always somewhat dearer than the
former, and yet a good deal cheaper than the
latter. By confining such commodities to the
home market, therefore, it was proposed to dis
courage the produce, not of Great Britain, but
of some foreign countries with which the ba
lance of trade was believed to be unfavourable
to Great Britain.

The prohibition of exporting from the co
lonies, to any other country but Great Britain,
masts, yards, and bowsprits, tar, pitch, and tur
pentine, naturally tended to lower the price of
timber in the colonies, and consequently to in
crease the expense of clearing their lands, the
principal obstacle to their improvement. But
about the beginning of the present century, in
1703, the pitch and tar company of Sweden
endeavoured to raise the price of their commo
dities to Great Britain, by prohibiting their ex
portation, except in their own ships, at their
own price, and in such quantities as they thought
proper. In order to counteract this notable
piece of mercantile policy, and to render herself

384 THE NATURE AND CAUSES OF BOOK IV.

as much as possible independent, not only of
Sweden, but of all the other northern powers,
Great Britain gave a bounty upon the importa
tion of naval stores from America, and the effect
of this bounty was to raise the price of timber in
America, much more than the confinement to
the home market could lower it ; and as both
regulations were enacted at the same time, their
joint effect was rather to encourage than to dis
courage the clearing of land in America.

Though pig and bar iron too have been put
among the enumerated commodities, yet as,
when imported from America, they are exempted
from considerable duties to which they are sub
ject when imported from any other country, the
one part of the regulation contributes more to
encourage the erection of furnaces in America,
than the other to discourage it. There is no
manufacture which occasions so great a con
sumption of wood as a furnace, or which can
contribute so much to the clearing of a country
overgrown with it.

The tendency of some of these regulations to
raise the value of timber in America, and there
by to facilitate the clearing of the land, was
neither, perhaps, intended nor understood by
the legislature. Though their beneficial effects,
however, have been in this respect accidental,
they have not upon that account been less real.

The most perfect freedom of trade is permitted
between the British colonies of America and the
West Indies, both in the enumerated and in the
non-enumerated commodities. Those colonies are

CHAP. VII. THE WEALTH OF NATIONS. 385

now become so populous and thriving, that each
of them finds in some of the others a great and
extensive market for every part of its produce.
All of them taken together, they make a great
internal market for the produce of one another.
The liberality of England, however, towards
the trade of her colonies, has been confined
chiefly to what concerns the market for their pro
duce, either in its rude state, or in what may be
called the very first stage of manufacture. The
more advanced or more refined manufactures
even of the colony produce, the merchants and
manufacturers of Great Britain choose to reserve
to themselves, and have prevailed upon the legis
lature to prevent their establishment in the colo
nies, sometimes by high duties, and sometimes
by absolute prohibitions.

While, for example, Muskovado sugars from
the British plantations, pay upon importation
only 6,9. 4fd. the hundred weight ; white sugars
pay II. Is. Id. ; and refined, either double or
single, in loaves 4/. %s. 5-f^d. When those
high duties were imposed, Great Britain was
the sole, and she still continues to be the prin
cipal market to which the sugars of the British
colonies could be exported. They amounted,
therefore, to a prohibition, at first of claying
or refining sugar for any foreign market, and
at present of claying or refining it for the market,
which takes off, perhaps, more than nine-tenths
of the whole produce. The manufacture of clay
ing or refining sugar accordingly, though it has
flourished in all the sugar colonies of France, has

VOL. II. C C

886 THE NATURE AND CAUSES OF BOOK iv.

been little cultivated in any of those of England,
except for the market of the colonies themselves.
While Grenada was in the hands of the French,
there was a refinery of sugar, by claying at
least, upon almost every plantation. Since it
fell into those of the English, almost all works
of this kind have been given up, and there are
at present, October, 1773, I am assured, not
above two or three remaining in the island. At
present, however, by an indulgence of the cus
tom-house, clayed or refined sugar, if reduced
from loaves into powder, is commonly imported
as Muskovado.

While Great Britain encourages in America
the manufactures of pig and bar iron, by ex
empting them from duties to which the like com
modities are subject when imported from any
other country, she imposes an absolute prohibi
tion upon the erection of steel furnaces and slit-
mills in any of her American plantations. She
will not suffer her colonies to work in those more
refined manufactures even for their own con
sumption ; but insists upon their purchasing of
her merchants and manufacturers all goods of
this kind which they have occasion for.

She prohibits the exportation from one pro
vince to another by water, and even the carriage
by land upon horseback or in a cart, of hats, of
wrools and woollen goods, of the produce of
America; a regulation which effectually prevents
the establishment of any manufacture of such
commodities for distant sale, and confines the
industry of her colonists in this way to such

CHAP. vn. THE WEALTH OF NATIONS. 387

coarse and household manufactures, as a private
family commonly makes for its own use, or for
that of some of its neighbours in the same pro
vince.

To prohibit a great people, however, from
making all that they can of every part of their
own produce, or from employing their stock and
industry in the way that they judge most advan
tageous to themselves, is a manifest violation of
the most sacred rights of mankind. Unjust,
however, as such prohibitions may be, they have
not hitherto been very hurtful to the colonies.
Land is still so cheap, and, consequently, labour
so dear among them, that they can import from
the mother country almost all the more refined
or more advanced manufactures cheaper than
they could make them for themselves. Though
they had not, therefore, been prohibited from
establishing such manufactures, yet in their pre
sent state of improvement, a regard to their own
interest would, probably, have prevented them
from doing so. In their present state of improve
ment, those prohibitions, perhaps, without cramp
ing their industry, or restraining it from any em
ployment to which it would have gone of its own
accord, are only impertinent badges of slavery
imposed upon them, without any sufficient rea
son, by the groundless jealousy of the merchants
and manufacturers of the mother country. In a
more advanced state they might be really op
pressive and insupportable.

Great Britain too, as she confines to her own
market some of the most important productions

c c 2

388 THE NATURE AND CAUSES OF BOOK IV.

of the colonies, so in compensation she gives to
some of them an advantage in that market ;
sometimes by imposing higher duties upon the
like productions when imported from other coun
tries, and sometimes by giving bounties upon
their importation from the colonies. In the first
way she gives an advantage in the home market
to the sugar, tobacco, and iron of her own colo
nies, and in the second to their raw silk, to
their hemp and flax, to their indigo, to their
naval-stores, and to their building timber. This
second way of encouraging the colony produce
by bounties upon importation, is, so far as I
have been able to learn, peculiar to Great Bri
tain. The first is not. Portugal does not con
tent herself with imposing higher duties upon
the importation of tobacco from any other coun
try, but prohibits it under the severest penal
ties.

With regard to the importation of goods from
Europe, England has likewise dealt more liber
ally with her colonies than any other nation.

Great Britain allows a part, almost always the
half, generally a larger portion, and sometimes
the whole of the duty which is paid upon the im
portation of foreign goods to be drawn back
upon their exportation to any foreign country.
No independent foreign country, it was easy to
foresee, would receive them if they came to it
loaded with the heavy duties to which almost all
foreign goods are subjected on their importation
into Great Britain. Unless, therefore, some
part of those duties was drawn back upon ex-

CHAP. vii. THE WEALTH OF NATIONS. 389

portation, there was an end of the carrying
trade ; a trade so much favoured by the mer
cantile system.

Our colonies, however, are by no means in
dependent foreign countries ; and Great Britain
having assumed to herself the exclusive right of
supplying them with all goods from Europe,
might have forced them (in the same manner
as other countries have done their colonies) to
receive such goods loaded with all the same
duties which they paid in the mother country.
But, on the contrary, till 1763, the same draw
backs were paid upon the exportation of the
greater part of foreign goods to our colonies as
to any independent foreign country. In 1763,
indeed, by the 4th of Geo. III. c. 15. this in
dulgence was a good deal debated, and it was
enacted, " That no part of the duty called the
"old subsidy should be drawn back for any
" goods of the growth, production, or manu-
" facture of Europe or the East Indies, which
" should be exported from this kingdom to any
" British colony or plantation in America ;
" wine, white calicoes, and muslins excepted."
Before this law, many different sorts of foreign
goods might have been bought cheaper in the
plantations than in the mother country; and
some may still.

Of the greater part of the regulations con
cerning the colony trade, the merchants who
carry it on, it must be observed, have been the
principal advisers. We must not wonder, there-

390 THE NATURE AND CAUSES OF BOOK IV.

fore, if, in the greater part of them, their in
terest has been more considered than either that
of the colonies or that of the mother country.
In their exclusive privilege of supplying the colo
nies with all the goods which they wanted from
Europe, and of purchasing all such parts of their
surplus produce as could not interfere with any
of the trades which they themselves carried on at
home, the interest of the colonies was sacrificed
to the interest of those merchants. In allowing
the same drawbacks upon the re-exportation of
the greater part of European and East India
goods to the colonies, as upon their re-export
ation to any independent country, the interest
of the mother country was sacrificed to it, even
according to the mercantile ideas of that inte
rest. It was for the interest of the merchants
to pay as little as possible for the foreign goods
which they sent to the colonies, and, conse
quently, to get back as much as possible of the
duties which they advanced upon their import
ation into Great Britain. They might thereby
be enabled to sell in the colonies, either the same
quantity of goods with a greater profit, or a
greater quantity with the same profit, and, con
sequently, to gain something either in the one
way or the other. It was, likewise, for the in
terest of the colonies to get all such goods as
cheap, and in as great abundance as possible.
But this might not always be for the interest of
the mother country. She might frequently
suffer both in her revenue, by giving back a

CHAP. VH. THE WEALTH OF NATIONS. 391

great part of the duties which had been paid upon
the importation of such goods ; and in her ma
nufactures, by being undersold in the colony mar
ket, in consequence of the easy terms upon which
foreign manufactures could be carried thither by
means of those drawbacks. The progress of the
linen manufacture of Great Britain, it is com
monly said, has been a good deal retarded by the
drawbacks upon the re-exportation of German
linen to the American colonies.

But though the policy of Great Britain with
regard to the trade of her colonies has been
dictated by the same mercantile spirit as that of
other nations, it has, however, upon the whole,
been less illiberal and oppressive than that of
any of them.

In every thing, except their foreign trade, the
liberty of the English colonists to manage their
own affairs their own way is complete. It is
in every respect equal to that of their fellow-
citizens at home, and is secured in the same
manner, by an assembly of the representatives of
the people, who claim the sole right of imposing
taxes for the support of the colony government.
The authority of this assembly overawes the
executive power, and neither the meanest nor
the most obnoxious colonist, as long as he obeys
the law, has any thing to fear from the resent
ment either of the governor, or of any other
civil or military officer in the province. The
colony assemblies, though, like the house of
commons in England, they are not always a very
equal representation of the people, yet they ap-

392 THE NATURE AND CAUSES OF BOOK iv.

proach more nearly to that character; and as the
executive power either has not the means to
corrupt them, or, on account of the support
which it receives from the mother country, is
not under the necessity of doing so, they are per
haps in general more influenced by the inclina
tions of their constituents. The councils, which
in the colony legislatures, correspond to the
house of lords in Great Britain, are not com
posed of an hereditary nobility. In some of the
colonies, as in three of the governments of New
England, those councils are not appointed by
the king, but chosen by the representatives of
the people. In none of the English colonies is
there any hereditary nobility. In all of them,
indeed, as in all other free countries, the de
scendant of an old colony family is more re
spected than an upstart of equal merit and for
tune: but he is only more respected, and he has
no privileges by which he can be troublesome to
his neighbours. Before the commencement of
the present disturbances, the colony assemblies
had not only the legislative, but a part of the
executive power. In Connecticut and Rhode
Island, they elected the governor. In the other
colonies they appointed the revenue officers who
collected the taxes imposed by those respective
assemblies, to whom those officers were imme
diately responsible. There is more equality,
therefore, among the English colonists, than
among the inhabitants of the mother country.
Their manners are more republican, and their
governments, those of three of the provinces of

CHAP. VII. THE WEALTH OF NATIONS. 393

New England in particular, have hitherto been
more republican too.

The absolute governments of Spain, Portugal,
and France, on the contrary, take place in their
colonies ; and the discretionary powers which
such governments commonly delegate to all
their inferior officers are, on account of the
great distance, naturally exercised there with
more than ordinary violence. Under all abso
lute governments there is, more liberty in the
capital than in any other part of the country.
The sovereign himself can never have either
interest or inclination to pervert the order of
justice, or to oppress the great body of the
people. In the capital his presence over-awes
more or less all his inferior officers, who in the
remoter provinces, from whence the complaints
of the people are less likely to reach him, can
exercise their tyranny with much more safety.
But the European colonies in America are more
remote than the most distant provinces of the
greatest empires which had ever been known
before. The government of the English colo
nies is perhaps the only one which, since the
world began, could give perfect security to the
inhabitants of so very distant a province. The
administration of the French colonies, however,
has always been conducted with more gentle
ness and moderation than that of the Spanish
and Portuguese. This superiority of conduct is
suitable both to the character of the French na
tion, and to what forms the character of every
nation, the nature of their government, which,

394 THE NATURE AND CAUSES OF BOOK IV,

though arbitrary and violent in comparison with
that of Great Britain, is legal and free in com
parison with those of Spain and Portugal.

It is in the progress of the North American
colonies, however, that the superiority of the
English policy chiefly appears. The progress of
the sugar colonies of France has been at least
equal, perhaps superior, to that of the greater
part of those of England ; and yet the sugar
colonies of England enjoy a free government
nearly of the same kind with that which takes
place in her colonies of North America. But
the sugar colonies of France are not discouraged,
like those of England, from refining their own
sugar; and, what is of still greater importance,
the genius of their government naturally intro
duces a better management of their negro slaves.

In all European colonies the culture of the
sugar-cane is carried on by negro slaves. The
constitution of those who have been born in the
temperate climate of Europe, could not, it is sup
posed, support the labour of digging the ground
under the burning sun of the West Indies; and
the culture of the sugar-cane, as it is managed
at present, is all hand labour, though, in the
opinion of many, the drill plough might be in
troduced into it with great advantage. But, as
the profit and success of the cultivation which is
carried on by means of cattle, depend very much
upon the good management of those cattle ; so
the profit and success of that which is carried on
by slaves, must depend equally upon the good
management of those slaves; and in the good

CHAP. VII. THE WEALTH OF NATIONS. 395

management of their slaves the French planters,
I think it is generally allowed, are superior to
the English. The law, so far as it gives some
weak protection to the slave against the violence
of his master, is likely to be better executed in
a colony where the government is in a great
measure arbitrary, than in one where it is alto
gether free. In every country where the unfor
tunate law of slavery is established, the magi
strate, when he protects the slave, intermeddles
in some measure in the management of the pri
vate property of the master; and, in a free
country, where the master is perhaps either a
member of the colony assembly, or an elector of
such a member, he dare not do this but with the
greatest caution and circumspection. The re
spect which he is obliged to pay to the master,
renders it more difficult for him to protect the
slave. But in a country where the government
is in a great measure arbitrary, where it is usual
for the magistrate to intermeddle even in the
management of the private property of indi
viduals, and to send them, perhaps, a lettre de
cachet if they do not manage it according to his
liking, it is much easier for him to give some
protection to the slave; and common humanity
naturally disposes him to do so. The protection
of the magistrate renders the slave less con
temptible in the eyes of his master, who is
thereby induced to consider him with more re
gard, and to treat him with more gentleness.
Gentle usage renders the slave not only more
faithful, but more intelligent, and therefore,

396 THE NATURE AND CAUSES OF BOOK iv.

upon a double account, more useful. He ap
proaches more to the condition of a free servant,
and may possess some degree of integrity and
attachment to his master's interest, virtues which
frequently belong to free servants, but which
never can belong to a slave, who is treated as
slaves commonly are in countries where the
master is perfectly free and secure.

That the condition of a slave is better under
an arbitrary than under a free government, is, I
believe, supported by the history of all ages and
nations. In the Roman history, the first time
we read of the magistrate interposing to protect
the slave from the violence of his master, is
under the emperors. When Vedius Pollio, in
the presence of Augustus, ordered one of his
slaves, who had committed a slight fault, to be
cut into pieces, and thrown into his fish-pond in
order to feed his fishes, the emperor commanded
him, with indignation, to emancipate immedi
ately, not only that slave, but all the others that
belonged to him. Under the republic no ma
gistrate could have had authority enough to pro
tect the slave, much less to punish the master.

The stock, it is to be observed, which has
improved the sugar colonies of France, par
ticularly the great colony of St. Domingo, has
been raised almost entirely from the gradual im
provement and cultivation of those colonies. It
has been almost altogether the produce of the
soil and of the industry of the colonists, or, what
comes to the same thing, the price of that pro
duce gradually accumulated by good manage-

CHAP. VII. THE WEALTH OF NATIONS, 307

merit, and employed in raising a still greater
produce. But the stock which has improved
and cultivated the sugar colonies of England
has, a great part of it, been sent out from Eng
land, and has by no means been altogether the
produce of the soil and industry of the colonists.
The prosperity of the English sugar colonies has
been, in a great measure, owing to the great
riches of England, of which a part has over
flowed, if one may say so, upon those colonies.
But the prosperity of the sugar colonies of France
has been entirely owing to the good conduct of
the colonists, which must therefore have had
some superiority over that of the English ; and
this superiority has been remarked in nothing
so much as in the good management of their
slaves.

Such have been the general outlines of the
policy of the different European nations with
regard to their colonies.

The policy of Europe, therefore, has very
little to boast of, either in the original establish
ment, or, so far as concerns their internal govern
ment, in the subsequent prosperity of the co
lonies of America.

Folly and injustice seem to have been the
principles which presided over and directed the
first project of establishing those colonies ; the
folly of hunting after gold and silver mines, and
the injustice of coveting the possession of a coun
try whose harmless natives, far from having ever
injured the people of Europe, had received the

THE NATURE AND CAUSES OF BOOK IV

first adventurers with every mark of kindness
and hospitality*

The adventurers, indeed, who formed some
of the later establishments, joined to the chi
merical project of finding gold and silver mines,
other motives more reasonable and more lauda
ble ; but even these motives do very little ho
nour to the policy of Europe.

The English puritans, restrained at home, fled
for freedom to America, and established there
the four governments of New England. The
English catholics, treated with much greater
injustice, established that of Maryland ; the
Quakers, that of Pennsylvania. The Portu
guese Jews, persecuted by the inquisition, stript
of their fortunes, and banished to Brazil, intro
duced, by their example, some sort of order
and industry among the transported felons and
strumpets, by whom that colony was originally
peopled, and taught them the culture of the
sugar-cane. Upon all these different occasions
it was, not the wisdom and policy, but the dis
order and injustice of the European govern
ments, which peopled and cultivated America.

In effectuating some of the most important of
these establishments, the different governments
of Europe had as little merit as in projecting
them. The conquest of Mexico was the project,
not of the council of Spain, but of a governor
of Cuba ; and it was effectuated by the spirit of
the bold adventurer to whom it was entrusted,
in spite of every thing which that governor, who

CHAP. VII. THE WEALTH OF NATIONS. 399

soon repented of having trusted such a person,
could do to thwart it. The conquerors of Chili
and Peru, and of almost all the other Spanish
settlements upon the continent of America, car
ried out with them no other public encourage
ment, but a general permission to make settle
ments and conquests in the name of the king
of Spain. Those adventures were all at the
private risk and expense of the adventurers.
The government of Spain contributed scarce
any thing to any of them. That of England
contributed as little towards effect uating the
establishment of some of its most important co
lonies in North America.

When those establishments were effectuated,
and had become so considerable as to attract
the attention of the mother country, the first
regulations which she made with regard to them
had always in view to secure to herself the mo
nopoly of their commerce ; to confine their
market, and to enlarge her own at their ex
pense, and, consequently, rather to damp and
discourage, than to quicken and forward the
course of their prosperity. In the different ways
in which this monopoly has been exercised, con
sists one of the most essential differences in the
policy of the different European nations with
regard to their colonies. The best of them all,
that of England, is only somewhat less illiberal
and oppressive than that of any of the rest.

In what way, therefore, has the policy of
Europe contributed either to the first establish
ment, or to the present grandeur of the colonies

400 THE NATURE AND CAUSES OF BOOK IV.

of America ? In one way, and in one way only,
it has contributed a good deal. Magna virum
mater ! It bred and formed the men who were
capable of achieving such great actions, and of
laying the foundation of so great an empire ; and
there is no other quarter of the world of which
the policy is capable of forming, or has ever
actually and in fact formed such men. The co
lonies owe to the policy of Europe the education
and great views of their active and enterprising
founders ; and some of the greatest and most im
portant of them, so far as concerns their internal
government, owe to it scarce any thing else.

PART THIRD.

Of the Advantages which Europe has derived from
the Discovery of America, and from that of a
Passage to the East Indies ly the Cape of Good
Hope.

SUCH are the advantages which the colonies
of America have derived from the policy of
Europe.

What are those which Europe has derived
from the discovery and colonization of America ?

Those advantages may be divided, first, into
the general advantages which Europe, considered
as one great country, has derived from those
great events ; and, secondly, into the particular
advantages which each colonizing country has
derived from the colonies which particularly be-

CHAP. VII. THE WEALTH OF NATIONS. 401

long to it, in consequence of the authority or
dominion which it exercises over them.

The general advantages which Europe, con
sidered as one great country, has derived from
the discovery and colonization of America, con
sist, first, in the increase of its enjoyments ; and
secondly, in the augmentation of its industry.

The surplus produce of America, imported
into Europe, furnishes the inhabitants of this
great continent with a variety of commodities
which they could not otherwise have possessed,
some for conveniency and use, some for pleasure,
and some for ornament, and thereby contributes
to increase their enjoyments.

The discovery and colonization of America,
it will readily be allowed, have contributed to
augment the industry, first, of all the countries
which trade to it directly ; such as Spain, Por
tugal, France, and England; and secondly, of
all those which, without trading to it directly,
send, through the medium of other countries,
goods to it of their own produce j such as Aus
trian Flanders, and some provinces of Germany,
which, through the medium of the countries be
fore mentioned, send to it a considerable quan
tity of linen and other goods. All such coun
tries have evidently gained a more extensive
market for their surplus produce, and must
consequently have been encouraged to increase
its quantity.

But, that those great events should likewise
have contributed to encourage the industry of
countries, such as Hungary and Poland, which

VOL. II. D D

102 THE NATURE AND CAUSES OF BOOK IV.

may never, perhaps, have sent a single commo
dity of their own produce to America, is not,
perhaps, altogether so evident. That those events
have done so, however, cannot be doubted.
Some part of the produce of America is con
sumed in Hungary and Poland, and there is
some demand there for the sugar, chocolate, and
tobacco, of that new quarter of the world. But
those commodities must be purchased with some
thing which is either the produce of the indus
try of Hungary and Poland, or with something
which had been purchased with some part of that
produce. Those commodities of America are
new values, new equivalents, introduced into
Hungary and Poland, to be exchanged there for
the surplus produce of those countries. By being
carried thither they create a new and more ex
tensive market for that surplus produce. They
raise its value, and thereby contribute to encou
rage its increase. Though no part of it may
ever be carried to America, it may be carried to
other countries which purchase it with a part of
their share of the surplus produce of America ;
and it may find a market by means of the circula
tion of that trade which was originally put into
motion by the surplus produce of America.

Those great events may even have contribu
ted to increase the enjoyments, and to augment
the industry of countries which, not only never
sent any commodities to America, but never
received any from it. Even such countries may
have received a greater abundance of other
commodities from countries of which the surplus

CHAP. Vlt. THE WEALTH OF NATIONS. 403

produce had been augmented by means of the
American trade. This greater abundance, as it
must necessarily have increased their enjoyments,
so it must likewise have augmented their indus
try. A greater number of new equivalents of
some kind or other must have been presented to
them to be exchanged for the surplus produce of
that industry. A more extensive market must
have been created for that surplus produce, so
as to raise its value, and thereby encourage its
increase. The mass of commodities annually
thrown into the great circle of European com
merce, and by its various revolutions annually
distributed among all the different nations com
prehended within it, must have been augmented
by the whole surplus produce of America. A
greater share of this greater mass, therefore, is
likely to have fallen to each of those nations, to
have increased their enjoyments, and augmented
their industry.

The exclusive trade of the mother countries
tends to diminish, or at least to keep down
below what they would otherwise rise to, both
the enjoyments and industry of all those nations
in general, and of the American colonies in par
ticular. It is a dead weight upon the action of
one of the great springs which puts into motion
a great part of the business of mankind. By ren
dering the colony produce dearer in all other
countries, it lessens its consumption, and thereby
cramps the industry of the colonies, and both the
enjoyments and the industry of all other coun
tries, which both enjoy less when they pay more

D D C2

404 THE NATURE AND CAUSES OF BOOK iv.

for what they enjoy, and produce less when they
get less for what they produce. By rendering
the produce of all other countries dearer in the
colonies, it cramps, in the same manner, the in
dustry of all other countries, and both the enjoy
ments and the industry of the colonies. It is a
clog which, for the supposed benefit of some par
ticular countries, embarrasses the pleasures, and
encumbers the industry of all other countries ;
but of the colonies more than of any other. It
not only excludes, as much as possible, all other
countries from one particular market ; but it
confines, as much as possible, the colonies to one
particular market; and the difference is very
great between being excluded from one particu
lar market, when all others are open, and being
confined to one particular market, when all
others are shut up. The surplus produce of the
colonies, however, is the original source of all
that increase of enjoyments and industry which
Europe derives from the discovery and coloniza
tion of America ; and the exclusive trade of the
mother countries tends to render this source
much less abundant than it otherwise would be.
The particular advantages which each colo
nizing country derives from the colonies which
particularly belong to it, are of two different
kinds ; first, those common advantages which
every empire derives from the provinces subject
to its dominion ; and, secondly, those peculiar
advantages which are supposed to result from
provinces of so very peculiar a nature as the
European colonies of America.

CHAP. VII. THE WEALTH OF NATIONS. 405

The common advantages which every empire
derives from the provinces subject to its domi
nion, consist, first, in the military force which
they furnish for its defence ; and, secondly, in
the revenue which they furnish for the support
of its civil government. The Roman colonies
furnished occasionally both the one and the
other. The Greek colonies, sometimes, fur
nished a military force; but seldom any reve
nue. They seldom acknowledged themselves
subject to the dominion of the mother city.
They were generally her allies in war, but very
seldom her subjects in peace.

The European colonies of America have never
yet furnished any military force for the defence
of the mother country. The military force has
never yet been sufficient for their own defence ;
and in the different wars in which the mother
countries have been engaged, the defence of
their colonies has generally occasioned a very
considerable distraction of the military force of
those countries. In this respect, therefore, all
the European colonies have, without exception,
been a cause rather of weakness than of strength
to their respective mother countries.

The colonies of Spain and Portugal only have
contributed any revenue towards the defence of
the mother country, or the support of her civil
government. The taxes which have been levied
upon those of other European nations, upon
those of England in particular, have seldom been
equal to the expense laid out upon them in time
of peace, and never sufficient to defray that

40(> THE NATUHK AM) CATSES OK BOOK iv.

which they occasioned in time of war. Such
colonies, therefore, have been a source of ex
pense and not of revenue to their respective
mother countries.

The advantages of such colonies to their re
spective mother countries, consist altogether in
those peculiar advantages which are supposed to
result from provinces of so very peculiar a na
ture as the European colonies of America; and
the exclusive trade, it is acknowledged, is the
sole source of all those peculiar advantages.

In consequence of this exclusive trade, all that
part of the surplus produce of the English colo
nies, for example, which consists in what are
called enumerated commodities, can be sent to
no other country but England. Other countries
must afterwards buy it of her. It must be
cheaper therefore in England than it can be in
any other country, and must contribute more to
increase the enjoyments of England than those
of any other country. It must likewise contri
bute more to encourage her industry. For all
those parts of her own surplus produce which
England exchanges for those enumerated com
modities, she must get a better price than any
other countries can get for the like parts of
theirs, when they exchange them for the same
commodities. The manufactures of England,
for example, will purchase a greater quantity of
the sugar and tobacco of her own colonies, than
the like manufactures of other countries can
purchase of that sugar and tobacco. So far,
therefore, as the manufactures of England and

CHAV. VII. THE WEALTH OF NATIONS. 407

those of other countries are both to be ex
changed for the sugar and tobacco of the English
colonies, this superiority of price gives an en
couragement to the former, beyond what the
latter can in these circumstances enjoy. The
exclusive trade of the colonies, therefore, as it
diminishes, or, at least, keeps down below what
they would otherwise rise to, both the enjoy
ments and the industry of the countries which do
not possess it; so it gives an evident advantage
to the countries which do possess it over those
other countries.

This advantage, however, will, perhaps, be
found to be rather what may be called a relative
than an absolute advantage; and to give a su
periority to the country which enjoys it, rather
by depressing the industry and produce of other
countries, than by raising those of that particu
lar country above what they would naturally
rise to in the case of a free trade.

The tobacco of Maryland and Virginia, for
example, by means of the monopoly which
England enjoys of it, certainly comes cheaper
to England than it can do to France, to whom
England commonly sells a considerable part of
it. But had France and all other European
countries been, at all times, allowed a free
trade to Maryland and Virginia, the tobacco
of those colonies might, by this time, have
come cheaper than it actually does, not only
to all those other countries, but likewise to
England. The produce of tobacco, in conse
quence of a market so much more extensive
than any which it has hitherto enjoyed, might,

408 THE NATURE AND CAUSES OF .BOOK iv.

and probably would, by this time, have been
so much increased as to reduce the profits of a
tobacco plantation to their natural level with
those of a corn plantation, which, it is supposed,
they are still somewhat above. The price oi
tobacco might, and probably would, by this
time, have fallen somewhat lower than it is at
present. An equal quantity of the commodi
ties either of England, or of those other coun
tries, might have purchased in Maryland and
Virginia a greater quantity of tobacco than it
can do at present, and, consequently, have been
sold there for so much a better price. So far as
that weed, therefore, can, by its cheapness and
abundance, increase the enjoyments or augment
the industry either of England or of any other
country, it would probably, in the case of a
free trade, have produced both these effects in
somewhat a greater degree than it can do at pre
sent. England, indeed, would not in this case
have had any advantage over other countries.
She might have bought the tobacco of her colo
nies somewhat cheaper, and, consequently, have
sold some of her own commodities somewhat
dearer than she actually does. But she could
neither have bought the one cheaper nor sold
the other dearer than any other country might
have done. She might, perhaps, have gained
an absolute, but she would certainly have lost a
relative advantage.

In order, however, to obtain this relative ad
vantage in the colony trade, in order to execute
the invidious and malignant project of excluding
as much as possible other nations from any share

CHAP. VII. THE WEALTH OF NATIONS. 409

in it, England, there are very probable reasons
for believing, has not only sacrificed a part of
the absolute advantage which she, as well as
every other nation, might have derived from
that trade, but has subjected herself both to an
absolute and to a relative disadvantage in almost
every other branch of trade.

When, by the act of navigation, England
assumed to herself the monopoly of the colony
trade, the foreign capitals which had before been
employed in it were necessarily withdrawn from
it. The English capital, which had before car
ried on but a part of it, was now to carry on the
whole. The capital which had before supplied
the colonies with but a part of the goods which
they wanted from Europe, was now all that was
employed to supply them with the whole. But
it could not supply them with the whole, and the
goods with which it did supply them were neces
sarily sold very dear. The capital which had
before bought but a part of the surplus produce
of the colonies, was now all that was employed
to buy the whole. But it could not buy the whole
at any thing near the old price, and, therefore,
whatever it did buy it necessarily bought very
cheap. But in an employment of capital in
which the merchant sold very dear and bought
very cheap, the profit must have been very great,
and much above the ordinary level of profit in
other branches of trade. This superiority of
profit in the colony trade could not fail to draw
from other branches of trade a part of the capital
which had before been employed in them. But
this revulsion of capital, as it must have gra-

410 THE NATUKE AND CAUSES OF BOOK iv.

dually increased the competition of capitals in
the colony trade, so it must have gradually di
minished that competition in all those other
branches of trade ; as it must have gradually low
ered the profits of the one, so it must have gra
dually raised those of the other, till the profits of
all came to a new level, different from and some
what higher than that at which they had been
before.

This double effect, of drawing capital from
all other trades, and of raising the rate of profit
somewhat higher than it otherwise would have
been in all trades, was not only produced by
this monopoly upon its first establishment, but
has continued to be produced by it ever since.

First, this monopoly has been continually
drawing capital from all other trades to be em
ployed in that of the colonies.

Though the wealth of Great Britain has in
creased very much since the establishment of
the act of navigation, it certainly has not in
creased in the same proportion as that of the
colonies. But the foreign trade of every country
naturally increases in proportion to its wealth,
its surplus produce in proportion to its whole
produce' ; and Great Britain having engrossed to
herself almost the whole of what may be called
the foreign trade of the colonies, and her capital
not having increased in the same proportion as
the extent of that trade, she could not carry it
on without continually withdrawing from other
branches of trade some part of the capital which
had before been employed in them, as well as
withholding from them a great deal more which

CHAP. vil. THE WEALTH OF NATIONS. 411

would otherwise have gone to them. Since the
establishment of the act of navigation, accord
ingly, the colony trade has been continually in-
creasing, while many other branches of foreign
trade, particularly of that to other parts of
Europe, have been continually decaying. Our
manufactures for foreign sale, instead of being
suited, as before the act of navigation, to the
neighbouring market of Europe, or to the more
distant one of the countries which lie round the
Mediterranean sea, have, the greater part of
them, been accommodated to the still more di
stant one of the colonies, to the market in which
they have the monopoly, rather than to that in
which they have many competitors. The causes
of decay in other branches of foreign trade,
which, by Sir Matthew Decker and other writers,
have been sought for in the excess and improper
mode of taxation, in the high price of labour,
in the increase of luxury, &c. may all be found in
the over-growth of the colony trade. The mer
cantile capital of Great Britain, though very
great, yet not being infinite ; and though greatly
increased since the act of navigation, yet not
being increased in the same proportion as the
colony trade, that trade could not possibly be
carried on without withdrawing some part of
that capital from other branches of trade, nor
consequently without, some decay of those other
branches.

England, it must be observed, was a great
trading country, her mercantile capital was very
great and likely to become still greater and
greater every day, not only before the act of

412 THE NATURE AND CAUSES or BOOK iv.

navigation had established the monopoly of the
colony trade, but before that trade was very con-
vsiderable. In the Dutch war, during the go
vernment of Cromwel, her navy was superior to
that of Holland ; and in that which broke out
in the beginning of the reign of Charles II. it
was at least equal, perhaps superior, to the united
navies of France and Holland. Its superiority,
perhaps, would scarce appear greater in the pre
sent times ; at least if the Dutch navy was to
bear the same proportion to the Dutch com
merce now which it did then. But this great
naval power could not, in either of those wars,
be owing to the act of navigation. During the
first of them the plan of that act had been but
just formed, and though before the breaking out
of the second it had been fully enacted by legal
authority ; yet no part of it could have had time
to produce any considerable effect, and least of
all that part which established the exclusive trade
to the colonies. Both the colonies and their
trade were inconsiderable then in comparison of
what they now are. The island of Jamaica was
an unwholesome desert, little inhabited, and less
cultivated. New York and New Jersey were in
the possession of the Dutch : the half of St.
Christopher's in that of the French. The island
of Antigua, the two Carolinas, Pennsylvania,
Georgia, and Nova Scotia, were not planted.
Virginia, Maryland, and New England were
planted ; and though they were very thriving
colonies, yet there was not, perhaps, at that time,
either in Europe or America, a single person
who foresaw or even suspected the rapid progress

CHAP. vil. THE WEALTH OF NATIONS 413

which they have since made in wealth, popula
tion, and improvement. The island of Barbadoes,
in short, was the only British colony of any con •
sequence of which the condition at that time
bore any resemblance to what it is at present.
The trade of the colonies, of which England,
even for some time after the act of navigation,
enjoyed but a part (for the act of navigation was
not very strictly executed till several years after
it was enactedj, could not at that time be the
cause of the great trade of England, nor of the
great naval power which was supported by that
trade. The trade which at that time supported
that great naval power was the trade of Europe,
and of the countries which lie round the ^Medi
terranean sea. But the share which Great Bri
tain at present enjoys of that trade could not
support any such great naval power. Had the
growing trade of the colonies been left free to all
nations, whatever share of it might have fallen
to Great Britain, and a very considerable share
would probably have fallen to her, must have
been all an addition to this great trade of which
she was before in possession. In consequence of
the monopoly, the increase of the colony trade
has not so much occasioned an addition to the
trade which Great Britain had before, as a total
change in its direction.

Secondly, this monopoly has necessarily con
tributed to keep up the rate of profit in all the
different branches of British trade higher than it
naturally would have been, had all nations been
allowed a free trade to the British colonies.

414 THE NATURE AND CAUSES OF BOOK iv.

The monopoly of the colony trade, as it ne
cessarily drew towards that trade a greater pro
portion of the capital of Great Britain than what
would have gone to it of its own accord ; so by
the expulsion of all foreign capitals it necessarily
reduced the whole quantity of capital employed
in that trade below what it naturally would have
been in the case of a free trade. But, by lessen
ing the competition of capitals in that branch of
trade, it necessarily raised the rate of profit in
that branch. By lessening too the competition
of British capitals in all other branches of trade,
it necessarily raised the rate of British profit in
all those other branches. Whatever may have
been, at that particular period, since the esta
blishment of the act of navigation, the state or
extent of the mercantile capital of Great Britain,
the monopoly of the colony trade must, during
the continuance of that state, have raised the
ordinary rate of British profit higher than it
otherwise would have been both in that and in
all the other branches of British trade. If, since
the establishment of the act of navigation, the
ordinary rate of British profit has fallen con
siderably, as it certainly has, it must have fallen
still lower, had not the monopoly established bv
that act contributed to keep it up.

But whatever raises in any country the ordi
nary rate of profit higher than it otherwise
would be, necessarily subjects that country both
to an absolute and to a relative disadvantage in
every branch of trade of which she has not the
monopoly.

CHAP. VII. THE WEALTH OF NATIONS. 415

It subjects her to an absolute disadvantage :
because in such branches of trade her merchants
cannot get this greater profit, without selling
dearer than they otherwise would do both the
goods of foreign countries which they import
into their own, and the goods of their own coun
try which they export to foreign countries. Their
own country must both buy dearer and sell dearer ;
must both buy less and sell less; must both enjoy
less and produce less, than she otherwise would do.

It subjects her to a relative disadvantage ; be
cause in such branches of trade it sets other coun
tries which are not subject to the same absolute
disadvantage, either more above her or less below
her than they otherwise would be. It enables
them both to enjoy more and to produce more in
proportion to what she enjoys and produces. It
renders their superiority greater or their infe
riority less than it otherwise would be. By raising
the price of her produce above what it otherwise
would be, it enables the merchants of other coun
tries to undersell her in foreign markets, and there
by to justle her out of almost all those branches
of trade, of which she has not the monopoly.

Our merchants frequently complain of the high
wages of British labour as the cause of their manu
factures being undersold in foreign markets; but
they are silent about the high profits of stock.
They complain of the extravagant gain of other
people; but they say nothing of their own. The
high profits of British stock, however, may con
tribute towards raising the price of British manu
factures in many cases as much, and in some per
haps more, than the high wages of British labour.

416 THE NATURE AND CAUSES OF BOOK i\.

It is in this manner that the capital of Great
Britain, one may justly say, has partly been
drawn and partly been driven from the greater
part of the different branches of trade of which
she has not the monopoly ; from the trade of
Europe in particular, and from that of the
countries which lie round the Mediterranean
sea.

It has partly been drawn from those branches
of trade ; by the attraction of superior profit in
the colony trade in consequence of the continual
increase of that trade, and of the continual in
sufficiency of the capital which had carried it
on one year to carry it on the next.

It has partly been driven from them ; by the
advantage which the high rate of profit, esta
blished in Great Britain, gives to other coun
tries, in all the different branches of trade of
which Great Britain has not the monopoly.

As the monopoly of the colony trade has
drawn from those other branches a part of the
British capital which would otherwise have been
employed in them, so it has forced into them
many foreign capitals which would never have
gone to them, had they not been expelled from
the colony trade. In those other branches of
trade it has diminished the competition of British
capitals, and thereby raised the rate of British
profit higher than it otherwise would have been.
On the contrary, it has increased the competi
tion of foreign capitals, and thereby sunk the
rate of foreign profit lower than it otherwise
would have been. Both in the one way and iu
the other it must evidently have subjected Great

CHAP. VII. THE WEALTH OF NATIONS. 417

Britain to a relative disadvantage in all those
other branches of trade.

The colony trade, however, it may. perhaps
be said, is more advantageous to Great Britain
than any other ; and the monopoly, by forcing
into that trade a greater proportion of the capital
of Great Britain than what would otherwise have
gone to it, has turned that capital into an em
ployment more advantageous to the country
than any other which it could have found.

The most advantageous employment of any
capital to the country to which it belongs, is
that which maintains there the greatest quantity
of productive labour, and increases the most the
annual produce of the land and labour of that
country. But the quantity of productive labour
which any capital employed in the foreign trade
of consumption can maintain, is exactly in pro
portion, it has been shown in the second book,
to the frequency of its returns. A capital of a
thousand pounds, for example, employed in a
foreign trade of consumption, of which the re
turns are made regularly once in the year, can
keep in constant employment, in the country
to which it belongs, a quantity of productive
labour equal to what a thousand pounds can
maintain there for a year. If the returns are
made twice or thrice in the year, it can keep in
constant employment a quantity of productive
labour equal to what two or three thousand
pounds can maintain there for a year. A foreign
trade of consumption carried on with a neigh
bouring, is, upon this account, in general, more

VOL. II. E E

418 THE NATURE AND CAUSES OF BOOK IV.

advantageous than one carried on with a distant
country; and for the same reason a direct foreign
trade of consumption, as it has likewise been
shown in the second book, is in general more
advantageous than a round-about one.

But the monopoly of the colony trade, so far
as it has operated upon the employment of the
capital of Great Britain, has in all cases forced
some part of it from a foreign trade of con
sumption carried on with a neighbouring, to one
carried on with a more distant country, and in
many cases from a direct foreign trade of con
sumption to a round-about one.

First, the monopoly of the colony trade has
in all cases forced some part of the capital of
Great Britain from a foreign trade of con-
sumption carried on with a neighbouring, to
one carried on with a more distant country.

It has, in all cases, forced some part of that
capital from the trade with Europe, and with the
countries which lie round the Mediterranean sea,
to that with the more distant regions of America,
and the West Indies, from which the returns are
necessarily less frequent, not only on account of
the greater distance, but on account of the pe
culiar circumstances of those countries. New
colonies, it has already been observed, are always
understocked. Their capital is always much less
than what they could employ with great profit
and advantage in the improvement and cultiva
tion of their land. They have a constant de
mand, therefore, for more capital than they have
of their own ; and, in order to supply the defi-

CHAP. VII. THE WEALTH OF NATIONS. 41 £

ciency of their own, they endeavour to borrow
as much as they can of the mother country, to
whom they are, therefore, always in debt. The
most common way in which the colonists con
tract this debt, is not by borrowing upon bond
of the rich people of the mother country, though
they sometimes do this too, but by running as
much in arrear to their correspondents, who sup
ply them with goods from Europe, as those cor
respondents will allow them. Their annual re
turns frequently do not amount to more than a
third, and sometimes not to so great a proportion
of what they owe. The whole capital, therefore,
which their correspondents advance to them is
seldom returned to Britain in less than three, and
sometimes not in less than four or five years. But
a British capital of a thousand pounds, for ex
ample, which is returned to Great Britain only
once in five years, can keep in constant employ
ment only one-fifth part of the British industry
which it could maintain if the whole was re
turned once in the year ; and, instead of the
quantity of industry which a thousand pounds
could maintain for a year, can keep in constant
employment the quantity only which two hun
dred pounds can maintain for a year. The
planter, no doubt, by the high price which he
pays for the goods from Europe, by the interest
upon the bills which he grants at distant dates,
and by the commission upon the renewal of those
which he grants at near dates, makes up, and
probably more than makes up, all the loss which
his correspondent can sustain by this delay. But,

420 THE NATURE AND CAUSES OF BOOK I v.

though he may make up the loss of his corre
spondent, he cannot make up that of Great Bri
tain. In a trade of which the returns are very
distant, the profit of the merchant may be as
great or greater than in one in which they are
very frequent and near; but the advantage of the
country in which he resides, the quantity of pro
ductive labour constantly maintained there, the
annual produce of the land and labour must
always be much less. That the returns of the
trade to America, and still more those of that to
the West Indies, are, in general, not only more
distant, but more irregular, and more uncertain
too, than those of the trade to any part of Eu
rope, or even of the countries which lie round
the Mediterranean sea, will readily be allowed, I
imagine, by every body who has any experience
of those different branches of trade.

Secondly, the monopoly of the colony trade
has, in many cases, forced some part of the
capital of Great Britain from a direct foreign
trade of consumption into a round-about one.

Among the enumerated commodities which
can be sent to no other market but Great Bri
tain, there are several of which the quantity
exceeds very much the consumption of Great
Britain, and of which a part, therefore, must be
exported to other countries. But this cannot be
done without forcing some part of the capital of
Great Britain into a round-about foreign trade
of consumption. Maryland and Virginia, for ex
ample, send annually to Great Britain upwards
of ninety-six thousand hogsheads of tobacco, and

CHAP. vir. THE WEALTH. OF NATIONS. 42.1

the consumption of Great Britain is said not to
exceed fourteen thousand. Upwards of eighty-
two thousand hogsheads, therefore, must be ex
ported to other countries, to France, to Holland,
and to the countries which lie round the Baltic
and Mediterranean seas. But, that part of the
capital of Great Britain which brings those
eighty-two thousand hogsheads to Great Britain,
which re-exports them from thence to those
other countries, and which brings back from
those other countries to Great Britain either
goods or money in return, is employed in a
round-about foreign trade of consumption ; and
is necessarily forced into this employment in
order to dispose of this great surplus. If we
would compute in how many years the whole
of this capital is likely to come back to Great
Britain, \vc must add to the distance of the Ame
rican returns that of the returns from those other
countries. If, in the direct foreign trade of
consumption which we carry on with America,
the whole capital employed frequently does not
come back in less than three or four years ; the
whole capital employed in this round-about one
is not likely to come back in less than four or
five. If the one can keep in constant employ
ment but a third or a fourth part of the do
mestic industry which could be maintained by a
capital returned once in the year, the other can
keep in constant employment but a fourth or a
fifth part of that industry. At some of the out-
ports a credit is commonly given to those fo
reign correspondents to whom they export their

THE NATURE AND CAUSES OF BOOK IV.

tobacco. At the port of London, indeed, it is
commonly sold for ready money. The rule is,
Weigh and pay. At the port of London, there
fore, the final returns of the whole round-about
trade are more distant than the returns from
America by the time only which the goods
may lie unsold in the warehouse ; where, how
ever, they may sometimes lie long enough. But,
had not the colonies been confined to the market
of Great Britain for the sale of their tobacco,
very little more of it would probably have come
to us than what was necessary for the home con
sumption. The goods which Great Britain pur
chases at present for her own consumption with
the great surplus of tobacco which she exports to
other countries, she would, in this case, probably
have purchased with the immediate produce of
her own industry, or with some part of her own
manufactures. That produce, those manufac
tures, instead of being almost entirely suited to
one great market, as at present, would probably
have been fitted to a great number of smaller
markets. Instead of one great round-about fo
reign trade of consumption, Great Britain would
probably have carried on a great number of
small direct foreign trades of the same kind. On
account of the frequency of the returns, a part,
and probably but a small part, perhaps not
above a third or a fourth, of the capital which at
present carries on this great round-about trade,
might have been sufficient to carry on all those
small direct ones, might have kept in constant
employment an equal quantity of British indus

CHAP. vii. THE WEALTH OF NATIONS. 423

try, and have equally supported the annual pro
duce of the land and labour of Great Britain.
All the purposes, of this trade being, in this man
ner, answered by a much smaller capital, there
would have been a large spare capital to apply
to other purposes ; to improve the lands, to in
crease the manufactures, and to extend the com
merce of Great Britain j to come into competi
tion at least with the other British capitals em
ployed in all those different ways, to reduce the
rate of profit in them all, and thereby to give to
Great Britain, in all of them a superiority over
other countries, still greater than what she at
present enjoys.

The monopoly of the colony trade too has
forced some part of the capital of Great Britain
from all foreign trade of consumption to a carry
ing trade ; and, consequently, from supporting
more or less the industry of Great Britain, to
be employed altogether in supporting partly
that of the colonies, and partly that of some
other countries.

The goods, for example, which are annually
purchased with the great surplus of eighty-two
thousand hogsheads of tobacco annually re-
exported from Great Britain, are not all con
sumed in Great Britain. Part of them, linen
from Germany and Holland, for example, is re
turned to the colonies for their particular con
sumption. But, that part of the capital of Great
Britain, which buys the tobacco with which this
linen is afterwards bought, is necessarily with
drawn from supporting the industry of Great

424? THE NATURE AND CAUSES OF BOOK IV.

Britain, to be employed altogether in support
ing, partly that of the colonies, and partly that
of the particular countries who pay for this
tobacco with the produce of their own in
dustry.

The monopoly of the colony trade besides, by
forcing towards it a much greater proportion of
the capital of Great Britain than what would
naturally have gone to it, seems to have broken
altogether that natural balance which would
otherwise have taken place among all the differ
ent branches of British industry. The industry
of Great Britain, instead of being accommodated
to a great number of small markets, has been
principally suited to one great market. Her
commerce, instead of running in a great number
of small channels, has been taught to run prin
cipally in one great channel. But the whole
system of her industry and commerce has thereby
been rendered less secure; the whole state of
her body politic less healthful, than it otherwise
would have been. In her present condition,
Great Britain resembles one of those unwhole
some bodies in which some of the vital parts are
overgrown, and which, upon that account, are
liable to many dangerous disorders scarce inci
dent to those in which all the parts are more
properly proportioned. A small stop in that
great blood-vessel, which has been artificially
swelled beyond its natural dimensions, and
through which an unnatural proportion of the
industry and commerce of the country has been
forced to circulate, is yery likely to bring on

CHAP. VII. THE WEALTH OF NATIONS. 4#5

the most dangerous disorders upon the whole
body politic. The expectation of a rupture
with the colonies, accordingly, has struck the
people of Great Britain with more terror than
they ever felt for a Spanish armada, or a French
invasion. It was this terror, whether well or ill
grounded, which rendered the repeal of the
stamp act, among the merchants at least, a po
pular measure. In the total exclusion from the
colony market, was it to last only for a few
years, the greater part of our merchants used
to fancy that they foresaw an entire stop to their
trade; the greater part of our master manufac
turers, the entire ruin of their business ; and the
greater part of our workmen, an end of their
employment. A rupture with any of our neigh
bours upon the continent, though likely too to
occasion some stop or interruption in the em
ployments of some of all these different orders of
people, is foreseen, however, without any such
general emotion. The blood of which the cir
culation is stopt in some of the smaller vessels,
easily disgorges itself into the greater, without
occasioning any dangerous disorder; but, when
it is stopt in any of the greater vessels, convul
sions, apoplexy, or death, are the immediate and
unavoidable consequences. If but one of those
overgrown manufactures, which by means either
of bounties or of the monopoly of the home and
colony markets, have been artificially raised up
to an unnatural height, finds some small stop or
interruption in its employment, it frequently
occasions a mutiny and disorder alarming to

426 THE NATURE AND CAUSES OF BOOK iv.

government, and embarrassing even to the de
liberations of the legislature. How great, there
fore, would be the disorder and confusion, it
was thought, which must necessarily be occa
sioned by a sudden and entire stop in the em
ployment of so great a proportion of our prin
cipal manufacturers !

Some moderate and gradual relaxation of the
laws which give to Great Britain the exclusive
trade to the colonies, till it is rendered in a great
measure free, seems to be the only expedient
which can, in all future times, deliver her from
this danger; which can enable her, or even force
her, to withdraw some part of her capital from
this overgrown employment, and to turn it,
though with less profit, towards other employ
ments ; and which, by gradually diminishing
one branch of her industry and gradually increas
ing all the rest, can by degrees restore all the
different branches of it to that natural, health
ful, and'proper proportion which perfect libert)
necessarily establishes, and which perfect libert}
can alone preserve. To open the colony trade al
at once to all nations, might not only occasioi
some transitory inconveniency, but a great per
manent loss to the greater part of those whos
industry or capital is at present engaged in it
The sudden loss of the employment even of th(
ships which import the eighty-two thousaru
hogsheads of tobacco, which are over and above
the consumption of Great Britain, might alone
be felt very sensibly. Such are the unfortunate
effects of all the regulations of the mercantile

CHAP. VII. THE WEALTH OF NATIONS. 427

system ! They not only introduce very danger
ous disorders into the state of the body politic,
but disorders which it is often difficult to re
medy, without occasioning, for a time at least,
still greater disorders. In what manner, there
fore, the colony trade ought gradually to be
opened; what are the restraints which ought first,
and what are those which ought last to be taken
away; or in what manner the natural system of
perfect liberty and justice ought gradually to be
restored, we must leave to the wisdom of future
statesmen and legislators to determine.

Five different events, unforeseen and un-
thought of, have very fortunately concurred to
hinder Great Britain from feeling, so sensibly as
it was generally expected she would, the total
exclusion which has now taken place for more
than a year, (from the first of December 1774)
from a very important branch of the colony
trade, that of the twelve associated provinces of
North America. First, those colonies, in pre
paring themselves for their non-importation
agreement, drained Great Britain completely of
all the commodities which were fit for their
market: secondly, the extraordinary demand of
the Spanish Flota has, this year, drained Ger
many and the North of many commodities, linen
in particular, which used to come into compe
tition, even in the British market, with the ma
nufactures of Great Britain ; thirdly, the peace
between Russia and Turkey has occasioned an
extraordinary demand from the Turkey market,
which during the distress of the country, and

428 THE NATURE AND CAUSES OF BOOK iv.

while a Russian fleet was cruizing in the Archi
pelago, had been very poorly supplied: fourthly,
the demand of the North of Europe for the ma
nufactures of Great Britain has been increas
ing from year to year for some time past: and,
fifthly, the late partition and consequential pa
cification of Poland, by opening the market of
that great country, have this year added an ex
traordinary demand from thence to the increas
ing demand of the North. These events are all,
except the fourth, in their nature transitory and
accidental, and the exclusion from so important
a branch of the colony trade, if unfortunately it
should continue much longer, may still occasion
some degree of distress. This distress, however,
as it will come on gradually, will be felt much
less severely than if it had come on all at once;
and, in the mean time, the industry and capital
of the country may find a new employment and
direction, so as to prevent this distress from ever
rising to any considerable height.

The monopoly of the colony trade, therefore,
so far as it has turned towards that trade a greater
proportion of the capital of Great Britain than
what would otherwise have gone to it, has in all
cases turned it, from a foreign trade of con
sumption with a neighbouring, into one with a
more distant country; in many cases, from a
direct foreign trade of consumption into a
round-about one; and in some cases, from all
foreign trade of consumption, into a carrying
trade. It has in all cases, therefore, turned it,
from a direction in which it would have main-

CHAP. VII. THE WEALTH OF NATIONS. 429

tained a greater quantity of productive labour,
into one in which it can maintain a much smaller
quantity. By suiting, besides, to one particular
market only, so great a part of the industry and
commerce of Great Britain, it has rendered the
whole state of that industry and commerce more
precarious and less secure, than if their produce
had been accommodated to a greater variety of
markets.

We must carefully distinguish between the
effects of the colony trade and those of the mono
poly of that trade. The former are always and
necessarily beneficial ; the latter always and ne
cessarily hurtful. But the former are so bene
ficial, that the colony trade, though subject to
a monopoly, and notwithstanding the hurtful ef
fects of that monopoly, is still upon the whole
beneficial, and greatly beneficial, though a good
deal less so than it otherwise would be.

The effect of the colony trade in its natural
and free state, is to open a great though distant
market for such parts of the produce of British
industry as may exceed the demand of the mar
kets nearer home, of those of Europe, and of the
countries which lie round the Mediterranean sea.
In its natural and free state, the colony trade,
without drawing from those markets any part of
the produce which had ever been sent to them,
encourages Great Britain to increase the surplus
continually, by continually presenting new equi
valents to be exchanged for it. In its natural
and free state, the colony trade tends to increase
the quantity of productive labour in Great

430 THE NATURE AND CAUSES OF BOOK IV.

Britain, but without altering in any respect the
direction of that which had been employed there
before. In the natural and free state of the
colony trade, the competition of all other nations
would hinder the rate of profit from rising above
the common level either in the new market, or
in the new employment. The new market,
without drawing any thing from the old one,
would create, if one may say so, a new produce
for its own supply ; and that new produce would
constitute a new capital for carrying on the new
employment, which in the same manner would
draw nothing from the old one.

The monopoly of the colony trade, on the
contrary, by excluding the competition of other
nations, and thereby raising the rate of profit both
in the new market and in the new employment,
draws produce from the old market and capital
from the old employment. To augment our
share of the colony trade beyond what it other
wise would be, is the avowed purpose of the mo
nopoly. If our share of that trade were to be
no greater with, than it would have been with
out the monopoly, there could have been no
reason for establishing the monopoly. But what
ever forces into a branch* of trade, of which the
returns are slower and more distant than those
of the greater part of other trades, a greater
proportion of the capital of any country than
what of its own accord would go to that branch,
necessarily renders the whole quantity of pro
ductive labour annually maintained there, the
whole annual produce of the land and labour of

CHAP. VII. THE WEALTH OF NATIONS. 431

that country, less than they otherwise would be.
It keeps down the revenue of the inhabitants of
that country, below what it would naturally rise
to, and thereby diminishes their power of ac
cumulation. It not only hinders, at all times,
their capital from maintaining so great a quan
tity of productive labour as it would otherwise
maintain, but it hinders it from increasing so
fast as it would otherwise increase, and conse
quently from maintaining a still greater quantity
of productive labour.

The natural good effects of the colony trade,
however, more than counterbalance to Great
Britain the bad effects of the monopoly, so that,
monopoly and altogether, that trade, even as it
is carried on at present, is not only advantageous,
but greatly advantageous. The new market and
the new employment which are opened by the
colony trade, are of much greater extent than
that portion of the old market and of the old
employment which is lost by the monopoly.
The new produce and the new capital which has
been created, if one may say so, by the colony
trade, maintain in Great Britain a greater quan
tity of productive labour than what can have
been thrown out of employment by the revulsion
of capital from other trades of which the returns
are more frequent. If the colony trade, however,
even as it is carried on at present, is advan
tageous to Great Britain, it is not by means of
the monopoly, but in spite of the monopoly.

It is rather for the manufactured than for the
rude produce of Europe, that the colony trade

432 THE NATURE AND CAUSES OF BOOK iv.

opens a new market. Agriculture is the proper
business of all new colonies ; a business which
the cheapness of land renders more advantage-
ous than any other. They abound, therefore, in
the rude produce of land, and instead of import
ing it from other countries, they have generally
a large surplus to export. In new colonies, agri
culture either draws hands from all other em
ployments, or keeps them from going to any
other employment. There are few hands to
spare for the necessary, and none for the orna
mental manufactures. The greater part of the
manufactures of both kinds, they find it cheaper
to purchase of other countries than to make for
themselves. It is chiefly by encouraging the
manufactures of Europe that the colony trade
indirectly encourages its agriculture. The ma
nufacturers of Europe, to whom that trade gives
employment, constitute a new market for the
produce of the land ; and the most advantage
ous of all markets ; the home market for the corn
and cattle, for the bread and butchers'-meat of
Europe is thus greatly extended by means of the
trade to America.

But that the monopoly of the trade of popu
lous and thriving colonies is not alone sufficient
to establish, or even to maintain manufactures in
any country, the examples of Spain and Portugal
sufficiently demonstrate. Spain and Portugal
were manufacturing countries before they had
any considerable colonies. Since they had the
richest and most fertile in the world, they have
both ceased to be so.

CHAP. vil. THE WEALTH OF NATIONS. 433

In Spain and Portugal the bad effects of the
monopoly, aggravated by other causes, have,
perhaps, nearly overbalanced the natural good
effects of the colony trade. These causes seem
to be other monopolies of different kinds ; the
degradation of the value of gold and silver below
what it is in most other countries ; the exclusion
from foreign markets by improper taxes upon
exportation, and the narrowing of the home
market, by still more improper taxes upon the
transportation of goods from one part of the
country to another ; but above all, that irregu
lar and partial administration of justice, which
often protects the rich and powerful debtor from
the pursuit of his injured creditor, and which
makes the industrious part of the nation afraid
to prepare goods for the consumption of those
haughty and great men, to whom they dare not
refuse to sell upon credit, and from whom they
are altogether uncertain of repayment.

In England, on the contrary, the natural
good effects of the colony trade, assisted by other
causes, have in a great measure conquered the
bad effects of the monopoly. These causes seem
to be, the general liberty of trade, which, not
withstanding some restraints, is at least equal,
perhaps superior, to what it is in any other
country ; the liberty of exporting, duty free,
almost all sorts of goods which are the produce
of domestic industry, to almost any foreign coun
try ; and what, perhaps, is of still greater im
portance, the unbounded liberty of transporting
them from any one part of our own country

VOL. II. F F

434 THE NATURE AND CAUSES OF BOOK iv.

to any other, without being obliged to give
any account to any public office, without being
liable to question or examination of any kind ;
but above all, that equal and impartial admini
stration of justice which renders the rights of
the meanest British subject respectable to the
greatest, and which, by securing to every man
the fruits of his own industry, gives the greatest
and most effectual encouragement to every sort
of industry.

If the manufactures of Great Britain, how
ever, have been advanced, as they certainly
have, by the colony trade, it has not been by
means of the monopoly of that trade, but in
spite of the monopoly. The effect of the mono
poly has been, not to augment the quantity, but
to alter the quality and shape of a part of the
manufactures of Great Britain, and to accom
modate to a market, from which the returns are
slow and distant, what would otherwise have
been accommodated to one from which the re
turns are frequent and near. Its effect has con
sequently been to turn a part of the capital of
Great Britain from an employment in which it
would have maintained a greater quantity of
manufacturing industry, to one in which it
maintains a much smaller, and thereby to di
minish, instead of increasing, the whole quantity
of manufacturing industry maintained in Great
Britain.

The monopoly of the colony trade, therefore,
like all the other mean and malignant expedients
of the mercantile system, depresses the industry

CHAP. vn. THE WEALTH OF NATIONS. 485

of all other countries, but chiefly that of the
colonies, without in the least increasing, but on
the contrary diminishing, that of the country in
whose favour it is established.

The monopoly hinders the capital of that
country, whatever may at any particular time be
the extent of that capital, from maintaining so
great a quantity of productive labour as it would
otherwise maintain, and from affording so great
a revenue to the industrious inhabitants as it
would otherwise afford. But as capital can be
increased only by savings from revenue, the mo
nopoly, by hindering it from affording so great
a revenue as it would otherwise afford, necessarily
hinders it from increasing so fast as it would
otherwise increase, and consequently from main
taining a still greater quantity of productive
labour, and affording a still greater revenue to
the industrious inhabitants of that country. One
great original source of revenue, therefore, the
wages of labour, the monopoly must necessarily
have rendered at all times less abundant than it
otherwise would have been.

By raising the rate of mercantile profit, the
monopoly discourages the improvement of land.
The profit of improvement depends upon the
difference between what the land actually pro
duces, and what, by the application of a certain
capital, it can be made to produce. If this
difference affords a greater profit than what can
be drawn from an equal capital in any mercantile
employment, the improvement of land will draw
capital from all mercantile employments. If

F F 2

436 THE NATURE AND CAUSES OF fioox iv.

the profit is less, mercantile employments will
draw capital from the improvement of land.
Whatever therefore raises the rate of mercantile
profit, either lessens the superiority or increases
the inferiority of the profit of improvement ; and
in the one case hinders capital from going to im
provement, and in the other draws capital from
it. But by discouraging improvement, the mo
nopoly necessarily retards the natural increase of
another great original source of revenue, the rent
of land. By raising the rate of profit too, the
monopoly necessarily keeps up the market rate
of interest higher than it otherwise would be.
But the price of land in proportion to the rent
which it affords, the number of years' purchase
which is commonly paid for it, necessarily falls
as the rate of interest rises, and rises as the rate
of interest falls. The monopoly, therefore, hurts
the interest of the landlord two different ways,
by retarding the natural increase, first, of his
rent, and, secondly, of the price which he would
get for his land in proportion to the rent which
it affords.

The monopoly, indeed, raises the rate of mer
cantile profit, and thereby augments somewhat
the gain of our merchants. But as it obstructs
the natural increase of capital, it tends rather to
diminish than to increase the sum total of the
revenue which the inhabitants of the country
derive from the profits of stock ; a small profit
upon a great capital generally affording a greater
revenue than a great profit upon a small one.
The monopoly raises the rate of profit, but it

CHAP. vil. THE WEALTH OF NATIONS. 437

hinders the sum of profit from rising so high as
it otherwise would do.

All the original sources of revenue, the wages
of labour, the rent of land, and the profits of
stock, the monopoly renders much less abundant
than they otherwise would be. To promote the
little interest of one little order of men in one
country, it hurts the interest of all other orders
of men in that country, and of all the men in
all other countries.

It is solely by raising the ordinary rate of profit
that the monopoly either has proved or could
prove advantageous to any one particular order
of men. But besides all the bad effects to the
country in general, which have already been men
tioned as necessarily resulting from a high rate
of profit ; there is one more fatal, perhaps, than
all these put together, but which, if we may
judge from experience, is inseparably connected
with it. The high rate of profit seems every
where to destroy that parsimony which in other
circumstances is natural to the character of the
merchant. When profits are high, that sober
virtue seems to be superfluous, and expensive
luxury to suit better the affluence of his situation.
But the owners of the great mercantile capitals
are necessarily the leaders and conductors of the
whole industry of every nation, and their example
has a much greater influence upon the manners
of the whole industrious part of it than that of
any other order of men. If his employer is at
tentive and parsimonious, the workman is very
likely to be so too ; but if the master is dissolute

438 THE NATURE AND CAUSES OF BOOK IV.

and disorderly, the servant who shapes his work
according to the pattern which his master pre
scribes to him, will shape his life too according
to the example which he sets him. Accumula
tion is thus prevented in the hands of all those
who are naturally the most disposed to accumu
late; and the funds destined for the maintenance
of productive labour receive no augmentation
from the revenue of those who ought naturally
to augment them the most. The capital of the
country, instead of increasing, gradually dwindles
away, and the quantity of productive labour
maintained in it grows every day less and less.
Have the exorbitant profits of the merchants of
Cadiz and Lisbon augmented the capital of
Spain and Portugal ? Have they alleviated the
poverty, have they promoted the industry of
those two beggarly countries ? Such has been the
tone of mercantile expense in those two trading
cities, that those exorbitant profits, far from aug
menting the general capital of the country, seem
scarce to have been sufficient to keep up the
capitals upon which they were made. Foreign
capitals are every day intruding themselves, if I
may say so, more and more into the trade of
Cadiz and Lisbon. It is to expel those foreign
capitals from a trade which their own grows
every day more and more insufficient for carry ing
on, that the Spaniards and Portuguese endea
vour every day to straiten more and more the
galling bands of their absurd monopoly. Com
pare the mercantile manners of Cadiz and Lisbon
with thoseof Amsterdam, and you will be sensible

CHAP. vii. THE WEALTH OF NATIONS. 439

how differently the conduct and character of
merchants are affected by the high and by the
low profits of stock, The merchants of London,
indeed, have not yet generally become such mag
nificent lords as those of Cadiz and Lisbon ; but
neither are they in general such attentive and
parsimonious burghers as those of Amsterdam.
They are supposed, however, many of them, to
be a good deal richer than the greater part of
the former, and not quite so rich as many of the
latter. But the rate of their profit is commonly
much lower than that of the former, and a good
deal higher than that of the latter. Light come
light go, says the proverb ; and the ordinary
tone of expense seems every where to be re
gulated, not so much according to the real
ability of spending, as to the supposed facility
of getting money to spend.

It is thus that the single advantage which the

O O

monopoly procures to a single order of men, is
in many different ways hurtful to the general
interest of the country.

To found a great empire for the sole purpose
of raising up a people of customers, may at first
sight appear a project fit only for a nation of
shopkeepers. It is, however, a project alto
gether unfit for a nation of shopkeepers ; but
extremely fit for a nation whose government
is influenced by shopkeepers. Such statesmen
and such statesmen only, are capable of fancy
ing that they will find some advantage in em_
ploying the blood and treasure of their fellow,
citizens, to found and maintain such an empire.
Say to a shopkeeper, Buy me a good estate,

440 THE NATURE AND CAUSES OF BOOK iv.

and I shall always buy my clothes at your shop,
even though I should pay somewhat dearer than
what I can have them for at other shops ;
and you will not find him very forward to em
brace your proposal. But should any other
person buy you such an estate, the shopkeeper
will be much obliged to your benefactor if he
would enjoin you to buy all your clothes at his
shop. England purchased them from some of
her subjects, who found themselves uneasy at
home, a great estate in a distant country. The
price, indeed, was very small, and instead of
thirty years' purchase, the ordinary price of
land in the present times, it amounted to little
more than the expense of the different equip
ments which made the first discovery, recon
noitred the coast, and took a fictitious possession
of the country. The land was good and of great
extent, and the cultivators having plenty of
good ground to work upon, and being for some
time at liberty to sell their produce where they
pleased, became in the course of little more than
thirty or forty years (between 16.^0 and 1660)
so numerous and thriving a people, that the
shopkeepers and other traders of England wished
to secure to themselves the monopoly of their
custom. Without pretending, therefore, that
they had paid any part, either of the original
purchase money, or of the subsequent expense
of improvement, they petitioned the parliament
that the cultivators of America might for the
future be confined to their shop ; first, for buy
ing all the goods which they wanted from Eu
rope 5 and, secondly, for selling all such parts

CHAP. vil. THE WEALTH OF NATIONS. 441

of their own produce as those traders might find
it convenient to buy. For they did not find it
convenient to buy every part of it. Some parts
of it imported into England might have inter
fered with some of the trades which they them
selves carried on at home. Those particular
parts of it, therefore, they were willing that
the colonists should sell where they could ; the
farther off the better ; and upon that account
proposed that their market should be confined
to the countries south of Cape Finisterre.
A clause in the famous act of navigation esta
blished this truly shopkeeper proposal into a
law.

The maintenance of this monopoly has hitherto
been the principal, or more properly, perhaps,
the sole end and purpose of the dominion which
Great Britain assumes over her colonies. In the
exclusive trade, it is supposed, consists the great
advantage of provinces, which have never yet
afforded either revenue or military force for the
support of the civil government, or the defence
of the mother country. The monopoly is the
principal badge of their dependency, and it is
the sole fruit which has hitherto been gathered
from that dependency. Whatever expense Great
Britain has hitherto laid out in maintaining this
dependency, has really been laid out in order to
support this monopoly. The expense of the
ordinary peace establishment of the colonies
amounted, before the commencement of the
present disturbances, to the pay of twenty regi
ments of foot ; to the expense of the artillery,
stores, and extraordinary provisions with which

442 THE NATURE AND CAUSES OF BOOK IV.

it was necessary to supply them ; and to the ex
pense of a very considerable naval force which
was constantly kept up in order to guard, from
the smuggling vessels of other nations, the im
mense coast of North America, and that of our
West Indian Islands. The whole expense of this
peace establishment was a charge upon the re
venue of Great Britain, and was, at the same
time, the smallest part of what the dominion of
the colonies has cost the mother country. If we
would know the amount of the whole, we must
add to the annual expense of this peace establish
ment the interest of the sums which, in conse
quence of her considering her colonies as pro
vinces subject to her dominion, Great Britain
has upon different occasions laid out upon their
defence. We must add to it, in particular, the
whole expense of the late war, and a great part
of that of the war which preceded it. The late
war was altogether a colony quarrel, and the
whole expense of it, in whatever part of the
world it might have been laid out, whether in
Germany or the East Indies, ought justly to be
stated to the account of the colonies. It amounted
to more than ninety millions sterling, including
not only the new debt which was contracted, but
the two shillings in the pound additional land-tax,
and the sums which were every year borrowed
from the sinking fund. The Spanish war which
began in 1739, was principally a colony quarrel.
Its principal object was to prevent the search of
the colony ships which carried on a contraband
trade with the Spanish main. This whole ex
pense is, in reality, a bounty which has been

CHAP. vir. THE WEALTH OF NATIONS. 443

given in order to support a monopoly. The
pretended purpose of it was to encourage the
manufactures, and to increase the commerce of
Great Britain. But its real effect has been to
raise the rate of mercantile profit, and to enable
our merchants to turn into a branch of trade, of
which the returns are more slow and distant than
those of the greater part of other trades, a greater
proportion of their capital than they otherwise
would have done ; two events which, if a bounty
could have prevented, it might perhaps have
been very well worth while to give such a bounty.

Under the present system of management,
therefore, Great Britain derives nothing but loss
from the dominion which she assumes over her
colonies.

To propose that Great Britain should volun
tarily give up all authority over her colonies,
and leave them to elect their own magistrates,
to enact their own laws, and to make peace and
war, as they might think proper, would be to
propose such a measure as never was, and never
will be adopted by any nation in the world.
No nation ever voluntarily gave up the domi
nion of any province, how troublesome soever it
might be to govern it, and how small soever the
revenue which it afforded might be in propor
tion to the expense which it occasioned. Such
sacrifices, though they might frequentlybe agree
able to the interest, are always mortifying to the
pride of every nation, and, what is perhaps of
still greater consequence, they are always con
trary to the private interest of the governing

444 THE NATURE AND CAUSES OF BOOK IV,

part of it, who would thereby be deprived of the
disposal of many places of trust and profit, of
many opportunities of acquiring wealth and di
stinction, which the possession of the most tur
bulent, and, to the great body of the people, the
most unprofitable province seldom fails to afford.
The most visionary enthusiasts would scarce be
capable of proposing such a measure, with any
serious hopes at least of its ever being adopted.
If it was adopted, however, Great Britain would
not only be immediately freed from the whole
annual expense of the peace establishment of
the colonies, but might settle with them such a
treaty of commerce as would effectually secure
to her a free trade, more advantageous to the
great body of the people, though less so to the
merchants, than the monopoly which she at pre
sent enjoys. By thus parting good friends, the.
natural affection of the colonies to the mother
country, which perhaps our late dissensions
have well nigh extinguished, would quickly re
vive. It might dispose them not only to respect,
for whole centuries together, that treaty of com
merce which they had concluded with us at part
ing, but to favour us in war as well as in trade,
and, instead of turbulent and factious subjects,
to become our most faithful, affectionate, and
generous allies; and the same sort of parental
affection on the one side, and filial respect on
the other, might revive between Great Britain
and her colonies, which used to subsist between
those of ancient Greece and the mother city
from which they descended.

CHAP. vii. THE WEALTH OF NATIONS. 445

In order to render any province advantageous
to the empire to which it belongs, it ought to
afford, in time of peace, a revenue to the public
sufficient not only for defraying the whole ex
pense of its own peace establishment, but for
contributing its proportion to the support of the
general government of the empire. Every pro
vince necessarily contributes, more or less, to
increase the expense of that general government.
If any particular province, therefore, does not
contribute its share towards defraying this ex
pense, an unequal burden must be thrown upon
some other part of the empire. The extraor
dinary revenue too which every province affords
to the public in time of war, ought, from parity
of reason, to bear the same proportion to the ex
traordinary revenue of the whole empire which
its ordinary revenue does in time of peace. That
neither the ordinary nor extraordinary revenue
which Great Britain derives from her colonies,
bears this proportion to the whole revenue of the
British empire, will readily be allowed. The
monopoly, it has been supposed, indeed, by in
creasing the private revenue of the people of
Great Britain, and thereby enabling them to
pay greater taxes, compensates the deficiency
of the public revenue of the colonies. But this
monopoly, I have endeavoured to show, though
a very grievous tax upon the colonies, and
though it may increase the revenue of a parti
cular order of men in Great Britain, diminishes
instead of increasing that of the great body of
the people ; and consequently diminishes instead

446 THE NATURE AND CAUSES OF BOOK Iv.

of increasing the ability of the great body of the
people to pay taxes. The men too whose reve
nue the monopoly increases, constitute a parti
cular order, which it is both absolutely impossi
ble to tax beyond the proportion of other orders,
and extremely impolitic even to attempt to tax
beyond that proportion, as I shall endeavour to
show in the following book. No particular re
source, therefore, can be drawn from this parti
cular order.

The colonies may be taxed either by their own
assemblies, or by the parliament of Great Britain.

That the colony assemblies can never be so
managed as to levy upon their constituents a
public revenue sufficient, not only to maintain
at all times their own civil and military establish
ment, but to pay their proper proportion of the
expense of the general government of the British
empire, seems not very probable. It was a long
time before even the parliament of England,
though placed immediately under the eye of the
sovereign, could be brought under such a sys
tem of management, or could be rendered suffi
ciently liberal in their grants for supporting the
civil and military establishments even of their
own country. It was only by distributing among
the particular members of parliament a great
part either of the offices, or of the disposal of the
offices arising from this civil and military esta
blishment, that such a system of management
could be established even with regard to the
parliament of England. But the distance of the
colony assemblies from the eye of the sovereign,

CHAP. VII. THE WEALTH OF NATIONS. 447

their number, their dispersed situation, and their
various constitutions, would render it very diffi
cult to manage them in the same manner, even
though the sovereign had the same means of
doing it ; and those means are wanting. It would
be absolutely impossible to distribute among all
the leading members of all the colony assem
blies such a share, either of the offices or of the
disposal of the offices arising from the general
government of the British empire, as to dispose
them to give up their popularity at home, and
to tax their constituents for the support of that
general government, of which almost the whole
emoluments were to be divided among people
who were strangers to them. The unavoidable
ignorance of administration, besides, concerning
the relative importance of the different members
of those different assemblies, the offences which
must frequently be given, the blunders which
must constantly be committed in attempting to
manage them in this manner, seems to render
such a system of management altogether im
practicable with regard to them.

The colony assemblies, besides, cannot be
supposed the proper judges of what is necessary
for the defence and support of the whole empire.
The care of that defence and support is not en
trusted to them. It is not their business, and
they have no regular means of information con
cerning it. The assembly of a province, like
the vestry of a parish, may judge very properly
concerning the affairs of its own particular dis
trict 5 but can have no proper means of judging

448 THE NATURE AND CAUSES OF BOOK IV.

concerning those of the whole empire. It can
not even judge properly concerning the propor
tion which its own province bears to the whole
empire ; or concerning the relative degree of its
wealth and importance, compared with the other
provinces; because those other provinces are not
under the inspection and superintendency of the
assembly of a particular province. What is ne
cessary for the defence and support of the whole
empire, and in what proportion each part ought
to contribute, can be judged of only by that as
sembly which inspects and superintends the af
fairs of the whole empire.

It has been proposed, accordingly, that the
colonies should be taxed by requisition, the par
liament of Great Britain determining the sum
which each colony ought to pay, and the pro
vincial assembly assessing and levying it in the
way that suited best the circumstances of the
province. What concerned the whole empire
would in this way be determined by the assem
bly which inspects and superintends the affairs of
the whole empire; and the provincial affairs of
each colony might still be regulated by its own
assembly. Though the colonies should in this
case have no representatives in the British parlia
ment, yet, if we may judge by experience, there
is no probability that the parliamentary requi
sition would be unreasonable. The parliament
of England has not upon any occasion shown the
smallest disposition to overburden those parts of
the empire which are not represented in parlia
ment. The islands of Guernsey and Jersey,

CHAP. VII. THE WEALTH OF NATIONS. 449

without any means of resisting the authority of
parliament, are more lightly taxed than any part
of Great Britain. Parliament in attempting to
exercise its supposed right, whether well or ill
grounded, of taxing the colonies, has never
hitherto demanded of them any thing which
even approached to a just proportion to what
was paid by their fellow-subjects at home. If
the contribution of the colonies, besides, was to
rise or fall in proportion to the rise or fall of the
land tax, parliament could not tax them with
out taxing at the same time its own constituents,
and the colonies might in this case be considered
as virtually represented in parliament.

Examples are not wanting of empires in which
all the different provinces are not taxed, if I
may be allowed the expression, in one mass ;
but in which the sovereign regulates the sum
which each province ought to pay, and in some
provinces assesses and levies it as he thinks pro
per ; while in others, he leaves it to be assessed
and levied as the respective states of each pro
vince shall determine. In some provinces of
France, the king not only imposes what taxes he
thinks proper, but assesses and levies them in the
way he thinks proper. From others he demands
a certain sum, but leaves it to the states of each
province to assess and levy that sum as they
think proper. According to the scheme of tax
ing by requisition, the parliament of Great Bri
tain would stand nearly in the same situation
towards the colony assemblies, as the king ol
France does towards the states of those provinces

VOL. II. G Q

450 THE NATURE AND CAUSES OF BOOK IV.

which still enjoy the privilege of having states
of their own, the provinces of France which are
supposed to be the best governed.

But though, according to this scheme, the
colonies could have no just reason to fear that
their share of the public burdens should ever
exceed the proper proportion to that of their fel
low-citizens at home ; Great Britain might have
just reason to fear that it never would amount
to that proper proportion. The parliament of
Great Britain has not for some time past had
the same established authority in the colonies
which the French king has in those provinces of
France which still enjoy the privilege of having
states of their own. The colony assemblies, if
they were not very favourably disposed (and un
less more skilfully managed than they ever have
been hitherto, they are not very likely to be so),
might still find many pretences for evading or
rejecting the most reasonable requisitions of par
liament. A French war breaks out, we shall
suppose ; ten millions must immediately be
raised, in order to defend the seat of the empire.
This sum must be borrowed upon the credit of
some parliamentary fund mortgaged for paying
the interest. Part of this fund parliament pro
poses to raise by a tax to be levied in Great Bri
tain, and part of it, by a requisition to all the
different colony assemblies of America and the
West Indies. Would people readily advance
their money upon the credit of a fund, which
partly depended upon the good humour of all
those assemblies, far distant from the seat of the

CHAP. VII. THE WEALTH OF NATIONS. 451

war, and sometimes, perhaps, thinking them
selves not much concerned in the event of it ?
Upon such a fund no more money would pro
bably be advanced than what the tax to be levied
in Great Britain might be supposed to answer
for. The whole burden of the debt contracted
on account of the war would in this manner fall,
as it always has done hitherto, upon Great Bri
tain ; upon a part of the empire, and not upon
the whole empire. Great Britain is, perhaps,
since the world began, the only state which, as
it has extended its empire, has only increased its
expense without once augmenting its resources.
Other states have generally disburdened them
selves, upon their subject and subordinate pro
vinces, of the most considerable part of the ex
pense of defending the empire. Great Britain
has hitherto suffered her subject and subordinate
provinces to disburden themselves upon her of
almost this whole expense. In order to put
Great Britain upon a footing of equality with
her own colonies, which the law has hitherto
supposed to be subject and subordinate, it seems
necessary, upon the scheme of taxing them by
parliamentary requisition, that parliament should
nave some means of rendering its requisitions im
mediately effectual, in case the colony assemblies
should attempt to evade or reject them ; and
what those means are, it is not very easy to con
ceive, and it has not yet been explained.

Should the parliament of Great Britain, at
the same tifiie, 'be ever fully established in the
right of taxing the colonies, even independent of

G G 2

452 THE NATURE AND CAUSES OF BOOK IV.

the consent of their own assemblies, the im
portance of those assemblies would from that
moment be at an end, and with it, that of all the
leading men of British America. Men desire to
have some share in the management of public
affairs, chiefly on account of the importance
which it gives them. Upon the power which the
greater part of the leading men, the natural aris
tocracy of every country, have of preserving or
defending their respective importance, depends
the stability and duration of every system of free
government. In the attacks which those lead
ing men are continually making upon the im
portance of one another, and in the defence of
their own, consists the whole play of domestic
faction and ambition. The leading men of
America, like those of all other countries, desire
to preserve their own importance. They feel, or
imagine, that if their assemblies, which they are
fond of calling parliaments, and of considering
as equal in authority to the parliament of Great
Britain, should be so far degraded as to become
the humble ministers and executive officers of
that parliament, the greater part of their own
importance would be at an end. They have re
jected, therefore, the proposal of being taxed by
parliamentary requisition, and like other ambi
tious and high-spirited men, have rather chosen
to draw the sword in defence of their own im
portance.

Towards the declension of the Roman re
public, the allies of Rome, who had borne the
principal burden of defending the state and ex-

CHAP. VII. THE WEALTH OF NATIONS. 453

tending the empire, demanded to be admitted to
all the privileges of Roman citizens. Upon
being refused, the social war broke out. During
the course of that war Rome granted those
privileges to the greater part of them, one by
one, and in proportion as they detached them
selves from the general confederacy. The par
liament of Great Britain insists upon taxing the
colonies ; and they refuse to be taxed by a par
liament in which they are not represented. If
to each colony, which should detach itself from
the general confederacy, Great Britain should
allow such a number of representatives as suited
the proportion of what it contributed to the
public revenue of the empire, in consequence
of its being subjected to the same taxes, and in
compensation admitted to the same freedom
of trade with its fellow-subjects at home ; the
number of its representatives to be augmented
as the proportion of its contribution might
afterwards augment ; a new method of acquir
ing importance, a new and more dazzling object
of ambition, would be presented to the leading
men of each colony. Instead of piddling for the
little prizes which are to be found in what may
be called the paltry raffle of colony faction ; they
might then hope, from the presumption which
men naturally have in their own ability and
good fortune, to draw some of the great prizes
which sometimes come from the wheel of the
great state lottery of British politics. Unless
this or some other method is fallen upon, and
there seems to be none more obvious than this, of

454 THE NATUBE AND CAUSES OF BOOK ivk

preserving the importance and of gratifying the
ambition of the leading men of America, it is
not very probable that they will ever voluntarily
submit to us ; and we ought to consider that the
blood which must be shed in forcing them to do
so, is, every drop of it, the blood either of those
who are, or of those whom we wish to have for our
fellow-citizens. They are very weak who flatter
themselves that, in the state to which things have
come, our colonies will be easily conquered by
force alone. The persons who now govern the
resolutions of what they call their continental
congress, feel in themselves at this moment a de
gree of importance which, perhaps, the greatest
subjects in Europe scarce feel. From shop
keepers, tradesmen, and attornies, they are be
come statesmen and legislators, and are em
ployed in contriving a new form of government
for an extensive empire, which, they flatter them
selves, will become, and which, indeed, seems
very likely to become, one of the greatest and
most formidable that ever was in the world.
Five hundred different people, perhaps, who in
different ways act immediately under the con
tinental congress ; and five hundred thousand,
perhaps, who act under those five hundred, all
feel in the same manner a proportionable rise in
their own importance. Almost every individual
of the governing party in America, fills, at pre
sent, in his own fancy, a station superior, not only
to what he had ever filled before, but to what he
had ever expected to fill ; and unless some new-
object of ambition is presented either to him or

CHAP. VII. THE WEALTH OF NATIONS. 455

to his leaders, if he has the ordinary spirit of a
man, he will die in defence of that station.

It is a remark of the president Henaut, that we
now read with pleasure the account of many
little transactions of the Ligue, which when they
happened were not perhaps considered as very
important pieces of news. But every man then,
says he, fancied himself of some importance ;
and the innumerable memoirs which have come
down to us from those times, were, the greater
part of them, written by people who took plea
sure in recording and magnifying events, in
which they flattered themselves, they had been
considerable actors. How obstinately the city
of Paris upon that occasion defended itself,
what a dreadful famine it supported, rather than
submit to the best, and afterwards to the most
beloved, of all the French kings, is well known.
The greater part of the citizens, or those who
governed the greater part of them, fought in de
fence of their own importance, which they fore
saw was to be at an end whenever the ancient
government should be re-established. Our co
lonies, unless they can be induced to consent to
a union, are very likely to defend themselves
against the best of all mother countries, as ob
stinately as the city of Paris did against one of
the best of kings.

The idea of representation was unknown in
ancient times. When the people of one state
were admitted to the right of citizenship in an
other, they had no other means of exercising that
right but by coming in a body to vote and de-

456 THE NATURE AND CAUSES OF BOOK IV.

liberate with the people of that other state. The
admission of the greater part of the inhabitants of
Italy to the privileges of Roman citizens, com
pletely ruined the Roman republic. It was no
longer possible to distinguish between who was
and who was not a Roman citizen. No tribe
could know its own members. A rabble of any
kind could be introduced into the assemblies of
the people, could drive out the real citizens, and
decide upon the affairs of the republic as if they
themselves had been such. But though America
were to send fifty or sixty new representatives to
parliament, the door-keeper of the house of
commons could not find any great difficulty in
distinguishing between who was and who was not
a member. Though the Roman constitution,
therefore, was necessarily ruined by the union of
Rome with the allied states of Italy, there is not
the least probability that the British constitution
would be hurt by the union of Great Britain with
her colonies. That constitution, on the con
trary, would be completed by it, and seems to
be imperfect without it. The assembly which
deliberates and decides concerning the affairs of
every part of the empire, in order to be properly
informed, ought certainly to have representatives
from every part of it. That this union, how
ever, could be easily effectuated, or that dif
ficulties and great difficulties might not occur
in the execution, I do not pretend. I have yet
heard of none, however, which appear insur
mountable. The principal, perhaps, arise not
from the nature of things, but from the pre-

CHAP. vii. THE WEALTH OF NATIONS. 457

judices and opinions of the people both on this
and on the other side of the Atlantic.

We on this side the water are afraid lest the
multitude of American representatives should
overturn the balance of the constitution, and in
crease too much either the influence of the crown
on the one hand, or the force of the democracy
on the other. But if the number of American
representatives were to be in proportion to the
produce of American taxation, the number of
people to be managed would increase exactly in
proportion to the means of managing them;
and the means of managing to the number of
people to be managed. The monarchical and
democratical parts of the constitution would,
after the union, stand exactly in the same de
gree of relative force with regard to one another
as they had done before.

The people on the other side of the water are
afraid lest their distance from the seat of govern
ment might expose them to many oppressions.
But their representatives in parliament, of which
the number ought from the first to be consider
able, would easily be able to protect them from
all oppression. The distance could not much
weaken the dependency of the representative
upon the constituent, and the former would still
feel that he owed his seat in parliament, and all
the consequence which he derived from it, to the
good-will of the latter. It would be the interest
of the former, therefore, to cultivate that good
will by complaining, with all the authority of a
member of the legislature, of every outrage which

458 THE NATURE AND CAUSES OF BOOK IV.

any civil or military officer might be guilty of in
those remote parts of the empire. The distance
of America from the seat of government, besides,
the natives of that country might flatter them
selves, with some appearance of reason too,
would not be of very long continuance. Such
has hitherto been the rapid progress of that coun
try in wealth, population, and improvement, that
in the course of little more than a century, per
haps, the produce of the American might exceed
that of British taxation. The seat of the empire
would then naturally remove itself to that part
of the empire which contributed most to the
general defence and support of the whole.

The discovery of America and that of a pass
age to the East Indies by the Cape of Good
Hope, are the two greatest and most important
events recorded in the history of mankind. Their
consequences have already been very great ;
but, in the short period of between two and
three centuries which has elapsed since these
discoveries were made, it is impossible that the
whole extent of their consequences can have
been seen. What benefits, or what misfortunes
to mankind may hereafter result from those
great events, no human wisdom can foresee. By
uniting, in some measure, the most distant parts
of the world, by enabling them to relieve one
another's wants, to increase one another's enjoy
ments, and to encourage one another's industry,
their general tendency would seem to be bene
ficial. To the natives, however, both of the
East and West Indies, all the commercial bene-

CHAP. Vil. THE WEALTH OF NATIONS. 459

fits which can have resulted from those events
have been sunk and lost in the dreadful misfor
tunes which they have occasioned. These mis
fortunes, however, seem to have arisen rather
from accident than from any thing in the nature
of those events themselves. At the particular
time when these discoveries were made, the su
periority of force happened to be so great on the
side of the Europeans that they were enabled to
commit with impunity every sort of injustice in
those remote countries. Hereafter, perhaps, the
natives of those countries may grow stronger,
or those of Europe may grow weaker, and the
inhabitants of all the different quarters of the
world may arrive at that equality of courage and
force which, by inspiring mutual fear, can alone
overawe the injustice of independent nations
into some sort of respect for the rights of one
another. But nothing seems more likely to
establish this equality of force than that mutual
communication of knowledge and of all sorts of
improvements which an extensive commerce
from all countries to all countries naturally, or
rather necessarily, carries along with it.

In the mean time one of the principal effects
of those discoveries has been to raise the mer
cantile system to a degree of splendour and glory
which it could never otherwise have attained to.
It is the object of that system to enrich a great
nation rather by trade and manufactures than by
the improvement and cultivation of land, rather
by the industry of the towns than by that of the
country. But in consequence of those dis-

4-60 THE NATURE AND CAUSES OF BOOK IV.

coveries, the commercial towns of Europe, in
stead of being the manufacturers and carriers for
but a very small part of the world (that part of
Europe which is washed by the Atlantic ocean,
and the countries which lie round the Baltic and
Mediterranean seas), have now become the ma
nufacturers for the numerous and thriving cul
tivators of America, and the carriers, and in
some respects the manufacturers too, for almost
all the different nations of Asia, Africa, and
America. Two new worlds have been opened
to their industry, each of them much greater
and more extensive than the old one, and the
market of one of them growing still greater and
greater every day.

The countries which possess the colonies of
America, and which trade directly to the East
Indies, enjoy, indeed, the whole show and splen
dour of this great commerce. Other countries,
however, notwithstanding all the invidious re
straints by which it is meant to exclude them,
frequently enjoy a greater share of the real
benefit of it. The colonies of Spain and Portu
gal, for example, give more real encouragement
to the industry of other countries than to that of
Spain and Portugal. In the single article of
linen alone the consumption of those colonies
amounts, it is said, but I do not pretend to
warrant the quantity, to more than three mil
lions sterling a year. But this great consumption
is almost entirely supplied by France, Flanders,
Holland, and Germany. Spain and Portugal
furnish but a small part of it. The capital

CHAP. VII. THE WEALTH OF NATIONS.

which supplies the colonies with this great quan
tity of linen is annually distributed among, and
furnishes a revenue to the inhabitants of those
other countries. The profits of it only are spent
in Spain and Portugal, where they help to sup
port the sumptuous profusion of the merchants
of Cadiz and Lisbon.

Even the regulations by which each nation
endeavours to secure to itself the exclusive trade
of its own colonies, are frequently more hurtful
to the countries in favour of which they are
established, than to those against which they are
established. The unjust oppression of the in
dustry of other countries falls back, if I may say
so, upon the heads of the oppressors, and crushes
their industry more than it does that of those
other countries. By those regulations, for ex
ample, the merchant of Hamburgh must send
the linen which he destines for the American
market to London, and he must bring back
from thence the tobacco which he destines for
the German market ; because he can neither
send the one directly to America, nor bring
back the other directly from thence. By this
restraint he is probably obliged to sell the one
somewhat cheaper, and to buy the other some
what dearer than he otherwise might have done;
and his profits are probably somewhat abridged
by means of it. In this trade, however, between
Hamburgh and London, he certainly receives
the returns of his capital much more quickly
than he could possibly have done in the direct
trade to America, even though we should sup-

462 THE NATURE AND CAUSES OF BOOK IV,

pose, what is by no means the case, that the pay
ments of America were as punctual as those of
London. In the trade, therefore, to which those
regulations confine the merchant of Hamburgh,
his capital can keep in constant employment a
much greater quantity of German industry than
it possibly could have done in the trade from
which he is excluded. Though the one employ
ment, therefore, may to him perhaps be less
profitable than the other, it cannot be less ad
vantageous to his country. It is quite otherwise
with the employment into which the monopoly
naturally attracts, if I may say so, the capital of
the London merchant. That employment may,
perhaps, be more profitable to him than the
greater part of other employments, but on ac
count of the slowness of the returns, it cannot
be more advantageous to his country.

After all the unjust attempts, therefore, of
every country in Europe to engross to itself the
whole advantage of the trade of its own colonies,
no country has yet been able to engross tc itself
any thing but the expense of supporting in time
of peace, and of defending in time of war, the
oppressive authority which it assumes over them.
The inconveniencies resulting from the posses
sion of its colonies, every country has engrossed
to itself completely. The advantages resulting
from their trade it has been obliged to share
with many other countries.

At first sight, no doubt, the monopoly of the
great commerce of America naturally seems to
be an acquisition of the highest value. To the

CHAP. VII. THE WEALTH OF NATIONS. 463

undiscerning eye of giddy ambition, it naturally
presents itself, amidst the confused scramble of
politics and war, as a very dazzling object to
fight for. The dazzling splendour of the object,
however, the immense greatness of the com
merce, is the very quality which renders the mo
nopoly of it hurtful, or which makes one employ
ment, in its own nature necessarily less advan
tageous to the country than the greater part of
other employments, absorb a much greater pro
portion of the capital of the country than what
would otherwise have gone to it.

The mercantile stock of every country, it has
been shown in the second book, naturally seeks,
if one may say so, the employment most advan
tageous to that country. If it is employed in the
carrying trade, the country to which it belongs
becomes the emporium of the goods of all the
countries whose trade that stock carries on. But
the owner of that stock necessarily wishes to dis
pose of as great a part of those goods as he can
at home. He thereby saves himself the trouble,
risk, and expense, of exportation, and he will
upon that account be glad to sell them at home,
not only for a much smaller price, but with
somewhat a smaller profit than he might expect
to make by sending them abroad. He naturally,
therefore, endeavours as much as he can to turn
his carrying trade into a foreign trade of con
sumption. If his stock again is employed in a
foreign trade of consumption, he will, for the
same reason, be glad to dispose of at home as
great a part as he can of the home goods, which

464 THE NATUBE AND CAUSES OF BOOK IV.

he collects in order to export to some foreign
market, and he will thus endeavour, as much as
he can, to turn his foreign trade of consumption
into a home trade. The mercantile stock of
every country naturally courts in this manner
the near, and shuns the distant employment;
naturally courts the employment in which the
returns are frequent, and shuns that in which
they are distant and slow; naturally courts the
employment in which it can maintain the great-
est quantity of productive labour in the country
to which it belongs, or in which its owner re
sides, and shuns that in which it can maintain
there the smallest quantity. It naturally courts
the employment which in ordinary cases is most
advantageous, and shuns that which in ordinary
cases is least advantageous to that country.

But if in any one of those distant employments,
which in ordinary cases are less advantageous to
the country, the profit should happen to rise
somewhat higher than what is sufficient to ba
lance the natural preference which is given to
nearer employments, this superiority of profit
will draw stock from those nearer employments,
till the profits of all return to their proper level.
This superiority of profit, however, is a proof
that in the actual circumstances of the society,
those distant employments are somewhat under
stocked in proportion to other employments, and
that the stock of the society is not distributed
in the properest manner among all the different
employments carried on in it. It is a proof that
something is either bought cheaper or sold dearer

CHAP. VII. THE WEALTH OF NATIONS. 465

than it ought to be, and that some particular
class of citizens is more or less oppressed either
by paying more or by getting less than what is
suitable to that equality, which ought to take
place, and which naturally does take place
among all the different classes of them. Though
the same capital never will maintain the same
quantity of productive labour in a distant as in a
near employment, yet a distant employment may
be as necessary for the welfare of the society as
a near one ; the goods which the distant employ
ment deals in being necessary, perhaps, for car
rying on many of the nearer employments. But
if the profits of those who deal in such goods are
above their proper level, those goods will be sold
dearer than they ought to be, or somewhat above
their natural price, and all those engaged in the
nearer employments will be more or less op
pressed by this high price. Their interest, there
fore, in this case, requires that some stock should
be withdrawn from those nearer employments,
and turned towards that distant one, in order to
reduce its profits to their proper level, and the
price of the goods which it deals in to their
natural price. In this extraordinary case, the
public interest requires that some stock should
be withdrawn from those employments which in
ordinary cases are more advantageous, and turned
towards one which in ordinary cases is less ad
vantageous to the public : and in this extraordi
nary case, the natural interests and inclinations of
men coincide as exactly with the public interest
as in all other ordinary cases, and lead them to

VOL. II. H II

466 THE NATURE AND CAUSES OF BOOK IV.

withdraw stock from the near, and to turn it
towards the distant employment.

It is thus that the private interests and pas
sions of individuals naturally dispose them to turn
their stock towards the employments which in
ordinary cases are most advantageous to the so
ciety. But if from this natural preference they
should turn too much of it towards those em
ployments, the fall of profit in them and the
rise of it in all others immediately dispose them
to alter this faulty distribution. Without any
intervention of law, therefore, the private inte
rests and passions of men naturally lead them to
divide and distribute the stock of every society,
among all the different employments carried on
in it, as nearly as possible in the proportion
which is most agreeable to the interest of the
whole society.

All the different regulations of the mercan
tile system necessarily derange more or less this
natural and most advantageous distribution of
stock. But those which concern the trade to
America and the East Indies derange it perhaps
more than any other ; because the trade to those
two great continents absorbs a greater quantity
of stock than any two other branches of trade.
The regulations, however, by which this de
rangement is effected in those two different
branches of trade are not altogether the same.
Monopoly is the great engine of both ; but it is
a different sort of monopoly. Monopoly of one
kind or another, indeed, seems to be the sole
engine of the mercantile system.

CHAP. VII. THE WEALTH OF NATIONS. 467

In the trade to America every nation endea
vours to engross as much as possible the whole
market of its own colonies, by fairly excluding
all other nations from any direct trade to them.
During the greater part of the sixteenth cen
tury, the Portuguese endeavoured to manage the
trade to the East Indies in the same manner, by
claiming the sole right of sailing in the Indian
seas, on account of the merit of having first
found out the road to them. The Dutch still
continue to exclude all other European nations
from any direct trade to their spice islands. Mo
nopolies of this kind are evidently established
against all other European nations, who are
thereby not only excluded from a trade to which
it might be convenient for them to turn some
part of their stock, but are obliged to buy the
goods which that trade deals in, somewhat dearer
than if they could import them themselves di
rectly from the countries which produce them.

But since the fall of the power of Portugal,
no European nation has claimed the exclusive
right of sailing in the Indian seas, of which the
principal ports are now open to the ships of all
European nations. Except in Portugal, how
ever, and within these few years in France, the
trade to the East Indies has in every European
country been subjected to an exclusive company.
Monopolies of this kind are properly established
against the very nation which erects them. The
greater part of that nation are thereby not only
excluded from a trade to which it might be con-

H H 2

468 THE NATURE AND CAUSES OF BOOK IV.

yenient for them to turn some part of their stock,
but are obliged to buy the goods which that
trade deals in, somewhat dearer than if it was
open and free to all their countrymen. Since
the establishment of the English East India
Company, for example, the other inhabitants of
England, over and above being excluded from
the trade, must have paid in the price of the East
India goods which they have consumed, not
only for all the extraordinary profits which the
company may have made upon those goods in
consequence of their monopoly, but for all the
extraordinary waste which the fraud and abuse,
inseparable from the management of the affairs
of so great a company, must necessarily have
occasioned. The absurdity of this second kind
of monopoly, therefore, is much more manifest
than that of the first.

Both these kinds of monopolies derange more
or less the natural distribution of the stock of
the society : but they do not always derange it
in the same way.

Monopolies of the first kind always attract
to the particular trade on which they are esta
blished, a greater proportion of the stock of the
society than what would go to that trade of its
own accord.

Monopolies of the second kind may some
times attract stock towards the particular trade
in which they are established, and sometimes
repel it from that trade, according to different
circumstances. In poor countries they naturally

CHAP. vii. THE WEALTH OF NATIONS. 469

attract towards that trade more stock than would
otherwise go to it. In rich countries they na
turally repel from it a good deal of stock which
would otherwise go to it.

Such poor countries as Sweden and Denmark,
for example, would probably have never sent a
single ship to the East Indies, had not the trade
been subjected to an exclusive company. The
establishment of such a company necessarily en
courages adventurers. Their monopoly secures
them against all competitors in the home mar
ket, and they have the same chance for foreign
markets with the traders of other nations. Their
monopoly shows them the certainty of a great
profit upon a considerable quantity of goods,
and the chance of a considerable profit upon a
great quantity. Without such extraordinary
encouragement, the poor traders of such poor
countries would probably never have thought of
hazarding their small capitals in so very distant
and uncertain an adventure as the trade to the
East Indies must naturally have appeared to
them.

Such a rich country as Holland, on the con
trary, would probably, in the case of a free
trade, send many more ships to the East Indies
than it actually does. The limited stock of the
Dutch East India company probably repels from
that trade many great mercantile capitals which
would otherwise go to it. The mercantile capital
of Holland is so great that it is, as it were, con
tinually overflowing, sometimes into the public
funds of foreign countries, sometimes into loans

470 THE NATURE AND CAUSES OF BOOK IT.

to private traders and adventurers of foreign
countries, sometimes into the most round-about
foreign trades of consumption, and sometimes
into the carrying trade. All near employments
being completely filled up, all the capital which
can be placed in them with any tolerable profit
being already placed in them, the capital of
Holland necessarily flows towards the most di
stant employments. The trade to the East
Indies, if it were altogether free, would pro
bably absorb the greater part of this redundant
capital. The East Indies offer a market both
for the manufactures of Europe and for the
gold and silver as well as for several other pro
ductions of America, greater and more extensive
than both Europe and America put together.

Every derangement of the natural distribution
of stock is necessarily hurtful to the society in
which it takes place ; whether it be by repelling
from a particular trade the stock which would
otherwise go to it, or by attracting towards a
particular trade that which would not otherwise
come to it. If, without any exclusive company,
the trade of Holland to the East Indies would
be greater than it actually is, that country must
suffer a considerable loss by part of its capital
being excluded from the employment most con
venient for that part. And in the same mari
ner, if, without an exclusive company, the trade
of Sweden and Denmark to the East Indies
would be less than it actually is, or, what per
haps is more probable, would not exist at all,
those two countries must likewise suffer a con-

CHAP. VII. THE WEALTH OF NATIONS. 471

siderable loss by part of their capital being
drawn into an employment, which must be more
or less unsuitable to their present circumstances.
Better for them, perhaps, in their present cir
cumstances, to buy East India goods of other
nations, even though they should pay somewhat
dearer, than to turn so great part of their small
capital to so very distant a trade, in which the
returns are so very slow, in which that capital
can maintain so small a quantity of productive
labour at home, where productive labour is so
much wanted, where so little is done, and where
so much is to do.

Though without an exclusive company, there
fore, a particular country should not be able to
carry on any direct trade to the East Indies, it
will not from thence follow that such a company
ought to be established there, but only that such
a country ought not in these circumstances to
trade directly to the East Indies. That such
companies are not in general necessary for carry
ing on the East India trade, is sufficiently demon
strated by the experience of the Portuguese, who
enjoyed almost the whole of it for more than a
century together without any exclusive company.

No private merchant, it has been said, could
well have capital sufficient to maintain factors
and agents in the different ports of the East
Indies, in order to provide goods for the ships
which he might occasionally send thither ; and
yet, unless he was able to do this, the difficulty
of finding a cargo might frequently make his
ships lose the season for returning, and the ex-

472 THE NATURE AND CAUSES OF BOOK IV.

pense of so long a delay would not only eat up
the whole profit of the adventure, but frequently
occasion a very considerable loss. This argu
ment, however, if it proved any thing at all,
would prove that no one great branch of trade
could be carried on without an exclusive com
pany, which is contrary to the experience of all
nations. There is no great branch of trade
in which the capital of any one private merchant
is sufficient for carrying on all the subordinate
branches which must be carried on, in order to
carry on the principal one. But when a nation
is ripe for any great branch of trade, some mer
chants naturally turn their capitals towards the
principal, and some towards the subordinate
branches of it ; and though all the different
branches of it are in this manner carried on, yet
it very seldom happens that they are all carried
on by the capital of one private merchant. If a
nation, therefore, is ripe for the East India trade,
a certain portion of its capital will naturally di
vide itself among all the different branches of
that trade. Some of its merchants will find it
for their interest to reside in the East Indies, and
to employ their capitals there in providing goods
for the ships which are to be sent out by other
merchants who reside in Europe. The settle
ments which different European nations have
obtained in the East Indies,"**if they were taken
from the exclusive companies to which they at
present belong, and put under the immediate
protection of the sovereign, would render this re
sidence both safe and easy, at least to the mer-

CHAP. VII. THE WEALTH OF NATIONS. 473

chants of the particular nations to whom those
settlements belong. If at any particular time
that part of the capital of any country which of
its own accord tended and inclined, if I may say
so, towards the East India trade, was not suffi
cient for carrying on all those different branches
of it, it would be a proof that, at that particular
time, that country was not ripe for that trade,
and that it would do better to buy for some
time, even at a higher price, from other Eu
ropean nations, the East India goods it had oc
casion for, than to import them itself directly
from the East Indies. What it might lose by
the high price of those goods could seldom be
equal to the loss which it would sustain by the
distraction of a large portion of its capital from
other employments more necessary or more use
ful, or more suitable to its circumstances and
situation, than a direct trade to the East Indies.
Though the Europeans possess many con
siderable settlements both upon the coast of
Africa and in the East Indies, they have not
yet established in either of those countries such
numerous and thriving colonies as those in the
islands and continent of America. Africa, how
ever, as well as several of the countries compre
hended under the general name of the East
Indies, are inhabited by barbarous nations. But
those nations were by no means so weak and
defenceless as the miserable and helpless Ameri
cans ; and in proportion to the natural fertility
of the countries which they inhabited, they were
besides much more populous. The most bar-

474 THE NATURE AND CAUSES OF BOOK iv.

barous nations either of Africa or of the East
Indies were shepherds; even the Hottentots were
so. But the natives of every part of America,
except Mexico and Peru, were only hunters ;
and the difference is very great between the
number of shepherds and that of hunters whom
the same extent of equally fertile territory can
maintain. In Africa and the East Indies, there
fore, it was more difficult to displace the natives,
and to extend the European plantations over the
greater part of the lands of the original inhabit
ants. The genius of exclusive companies, be
sides, is unfavourable, it has already been ob
served, to the growth of new colonies, and has
probably been the principal cause of the little pro
gress which they have made in the East Indies.
The Portuguese carried on the trade both to
Africa and the East Indies without any exclu
sive companies, and their settlements at Congo,
Angola, and Benguela on the coast of Africa,
and at Goa in the East Indies, though much
depressed by superstition and every sort of bad
government, yet bear some faint resemblance to
the colonies of America, and are partly inhabited
by Portuguese who have been established there
for several generations. The Dutch settlements
at the Cape of Good Hope and at Batavia are
at present the most considerable colonies which
the Europeans have established either in Africa
or in tne East Indies, and both these settlements
are peculiarly fortunate in their situation. The
Cape of Good Hope was inhabited by a race of
people almost as barbarous and quite as inca-

CHAP. VII. THE WEALTH OF NATIONS. 475

pable of defending themselves as the natives of
America. It is besides the half-way house, if
one may say so, between Europe and the East
Indies, at which almost every European ship
makes some stay both in going and returning.
The supplying of those ships with every sort of
fresh provisions, with fruit and sometimes with
wine, affords alone a very extensive market for
the surplus produce of the colonists. What the
Cape of Good Hope is between Europe and
every part of the East Indies, Batavia is between
the principal countries of the East Indies. It
lies upon the most frequented road from Indos-
tan to China and Japan, and is nearly about mid
way upon that road. Almost all the ships too
that sail between Europe and China touch at
Batavia ; and it is, over and above all this, the
centre and principal mart of what is called the
country trade of the East Indies; not only of
that part of it which is carried on by Europeans,
but of that which is carried on by the native In
dians ; and vessels navigated by the inhabitants
of China and Japan, of Tonquin, Malacca, Co-
chin-China, and the island of Celebes, are fre
quently to be seen in its port. Such advantage
ous situations have enabled those two colonies
to surmount all the obstacles which the oppres
sive genius of an exclusive company may have
occasionally opposed to their growth. They have
enabled Batavia to surmount the additional dis
advantage of perhaps the most unwholesome cli
mate in the world.

476 THE NATURE AND CAUSES OF BOOK IV.

The English and Dutch companies, though
they have established no considerable colonies,
except the two above mentioned, have both
made considerable conquests in the East Indies.
But in the manner in which they both govern
their new subjects, the natural genius of an ex
clusive company has shown itself most distinctly.
In the spice islands the Dutch are said to burn
all the spiceries which a fertile season produces
beyond what they expect to dispose of in Eu
rope with such a profit as they think sufficient.
In the islands where they have no settlements,
they give a premium to those who collect the
young blossoms and green leaves of the clove
and nutmeg trees which naturally grow there,
but which this savage policy has now, it is said,
almost completely extirpated. Even in the
islands where they have settlements they have
very much reduced, it is said, the number of
those trees. If the produce even of their own
islands was much greater than what suited their
markets, the natives, they suspect, might find
means to convey some part of it to other na
tions; and the best way, they imagine, to secure
their own monopoly, is to take care that no more
shall grow than what they themselves carry to
market. By different arts of oppression they
have reduced the population of several of the
Moluccas nearly to the number which is suffi
cient to supply with fresh provisions and other
necessaries of life their own insignificant garri
sons, and such of their ships as occasionally come

CHAP. VII. THE WEALTH OF NATIONS. 477

there for a cargo of spices. Under the govern
ment even of the Portuguese, however, those
islands are said to have been tolerably well in
habited. The English company have not yet had
time to establish in Bengal so perfectly destruc
tive a system. The plan of their government,
however, has had exactly the same tendency. It
has not been uncommon, I am well assured, for
the chief, that is, the first clerk of a factory, to
order a peasant to plough up a rich field of pop
pies, and sow it with rice or some other grain.
The pretence was, to prevent a scarcity of pro
visions; but the real reason, to give the chief an
opportunity of selling at a better price a large
quantity of opium which he happened then to
have upon hand. Upon other occasions the order
has been reversed ; and a rich field of rice or
other grain has been ploughed up, in order to
make room for a plantation of poppies; when
the chief foresaw that extraordinary profit was
likely to be made by opium. The servants of
the company have upon several occasions at
tempted to establish in their own favour the mo
nopoly of some of the most important branches,
not only of the foreign, but of the inland trade
of the country. Had they been allowed to go on,
it is impossible that they should not at some time
or another have attempted to restrain the pro
duction of the particular articles of which they
had thus usurped the monopoly, not only to the
quantity which they themselves could purchase,
but to that which they could expect to sell with
such a profit as they might think sufficient. In

478 THE NATURE AND CAUSES OF BOOK IV.

the course of a century or two, the policy of the
English company would in this manner have
probably proved as completely destructive as
that of the Dutch.

Nothing, however, can be more directly con
trary to the real interest of those companies, con
sidered as the sovereigns of the countries which
they have conquered, than this destructive plan.
In almost all countries the revenue of the sove
reign is drawn from that of the people. The
greater the revenue of the people, therefore, the
greater the annual produce of their land and
labour, the more they can afford to the sove
reign. It is his interest, therefore, to increase as
much as possible that annual produce. But if
this is the interest of every sovereign, it is pe
culiarly so of one whose revenue, like that of the
sovereign of Bengal, arises chiefly from a land-
rent. That rent must necessarily be in propor
tion to the quantity and value of the produce,
and both the one and the other must depend
upon the extent of the market. The quantity
will always be suited with more or less exactness
to the consumption of those who can afford to
pay for it, and the price which they will pay will
always be in proportion to the eagerness of their
competition. It is the interest of such a sove
reign, therefore, to open the most extensive
market for the produce of his country, to allow
the most perfect freedom of commerce, in order
to increase as much as possible the number and
the competition of buyers; and upon this ac
count to abolish, not only all monopolies, but

CHAP. VII. THE WEALTH OF NATIONS. 479

all restraints upon the transportation of the
home produce from one part of the country to
another, upon its exportation to foreign coun
tries, or upon the importation of goods of any
kind for which it can be exchanged. He is in
this manner most likely to increase both the
quantity and value of that produce, and conse
quently of his own share of it, or of his own re
venue.

But a company of merchants are, it seems,
incapable of considering themselves as sove
reigns, even after they have become such.
Trade, or buying in order to sell again, they
still consider as their principal business, and by
a strange absurdity, regard the character of the
sovereign, as but an appendix to that of the
merchant, as something which ought to be made
subservient to it, or by means of which they
may be enabled to buy cheaper in India, and
thereby to sell with a better profit in Europe.
They endeavour for this purpose to keep out as
much as possible all competitors from the mar
ket of the countries which are subject to their
government, and consequently to reduce, at
least, some part of the surplus produce of those
countries to what is barely sufficient for supply
ing their own demand, or to what they can ex
pect to sell in Europe with such a profit as they
may think reasonable. Their mercantile habits
draw them in this manner, almost necessarily,
though perhaps insensibly, to prefer upon all or
dinary occasions the little and transitory profit
of the monopolist to the great and permanent

480 THE NATU11E AND CAUSES OF BOOK IV.

revenue of the sovereign, and would gradually
lead them to treat the countries subject to their
government, nearly as the Dutch treat the Mo
luccas. It is the interest of the East India com
pany, considered as sovereigns, that the Euro
pean goods which are carried to their Indian
dominions should be sold there as cheap as pos
sible ; and that the Indian goods which are
brought from thence should bring there as good
a price, or should be sold there as dear as pos
sible. But the reverse of this is their interest
as merchants. As sovereigns, their interest is
exactly the same with that of the country which
they govern. As merchants, their interest is
directly opposite to that interest.

But if the genius of such a government, even
as to what concerns its direction in Europe, is
in this manner essentially and perhaps incurably
faulty, that of its administration in India is still
more so. That administration is necessarily
composed of a council of merchants, a profession
no doubt extremely respectable, but which in no
country in the world carries along with it that
sort of authority which naturally over-awes the
people, and without force commands their willing
obedience. Such a council can command obe
dience only by the military force with which
they are accompanied, and their government is
therefore necessarily military and despotical.
Their proper business, however, is that of mer
chants. It is to sell, upon their masters' ac
count, the European goods consigned to them,
and to buy in return Indian goods for the

CHAP. VII. THE WEALTH OF NATIONS. 481

European market. It is to sell the one as dear
and to buy the other as cheap as possible, and
consequently to exclude as much as possible all
rivals from the particular market where they
keep their shop. The genius of the administra
tion, therefore, so far as concerns the trade of
the company, is the same as that of the direction.
It tends to make government subservient to the
interest of monopoly, and consequently to stunt
the natural growth of some parts at least of the
surplus produce of the country to what is barely
sufficient for answering the demand of the com
pany.

All the members of the administration, be
sides, trade more or less upon their own account,
and it is in vain to prohibit them from doing so.
Nothing can be more completely foolish than to
expect that the clerks of a great counting-house
at ten thousand miles distance, and consequently
almost quite out of sight, should, upon a simple
order from their masters, give up at once doing
any sort of business upon their own account,
abandon for ever all hopes of making a fortune,
of which they have the means in their hands, and
' content themselves with the moderate salaries
which those masters allow them, and which,
moderate as they are, can seldom be augmented,
being commonly as large as the real profits of
the company trade can afford. In such circum
stances, to prohibit the servants of the company
from trading upon their own account, can have
scarce any other effect than to enable the supe
rior servants, under pretence of executing their
masters' order, to oppress such of the inferior

VOL. II. I I

482 THE NATUftE AND CAUSES OF BOOK IV.

ones, as have had the misfortune to fall under
their displeasure. The servants naturally endea
vour to establish the same monopoly in favour of
their own private trade as of the public trade of
the company. If they are suffered to act as they
could wish, they will establish this monopoly
openly and directly, by fairly prohibiting all
other people from trading in the articles in which
they choose to deal; and this, perhaps, is the
best and least oppressive way of establishing it.
But if by an order from Europe they are prohi
bited from doing this, they will, notwithstand
ing, endeavour to establish a monopoly of the
same kind, secretly and indirectly in a way that
is much more destructive to the country. They
will employ the whole authority of government,
and pervert the administration of justice, in
order to harass and ruin those who interfere with
them in any branch of commerce which, by
means of agents, either concealed, or at least not
publicly avowed, they may choose to carry on.
But the private trade of the servants will natu
rally extend to a much greater variety of articles
than the public trade of the company. The pub
lic trade of the company extends no further than
the trade with Europe, and comprehends a part
only of the foreign trade of the country. But the
private trade of the servants may extend to all
the different branches both of its inland and fo
reign trade. The monopoly of the company can
tend only to stunt the natural growth of that
part of the surplus produce which, in the case
of a free trade, would be exported to Europe.
That of the servants tends to stunt the natural

CHAP. VII. THE WEALTH OF NATIONS.

growth of every part of the produce in which
they choose to deal, of what is destined for home
consumption, as well as of what is destined for
exportation; and consequently to degrade the
cultivation of the whole country, and to reduce
the number of its inhabitants. It tends to reduce
the quantity of every sort of produce, even that
of the necessaries of life, whenever the servants
of the company choose to deal in them, to what
those servants can both afford to buy and expect
to sell with such a profit as pleases them.

From the nature of their situation too the ser
vants must be more disposed to support with
rigorous severity their own interest against that
of the country which they govern, than their
masters can be to support theirs. The country
belongs to their masters, who cannot avoid hav
ing some regard for the interest of what belongs
to them. But it does not belong to the servants.
The real interest of their masters, if they were
capable of understanding it, is the same with
that of the country * ; and it is from ignorance
chiefly, and the meanness of mercantile preju
dice, that they ever oppress it. But the real in
terest of the servants is by no means the same
with that of the country, and the most perfect
information would not necessarily put an end to
their oppressions. The regulations accordingly
which have been sent out from Europe, though
they have been frequently weak, have upon most

* The interest of every proprietor of India stock, however,
is by no means the same with that of the country in the go
vernment of which his vote gives him some influence. See
Book V. Chap. i. Part 3d.

I 1 2

484 THE NATURE AND CAUSES OF BOOK iv.

occasions been well-meaning. More intelligence
and perhaps less good-meaning has sometimes
appeared in those established by the servants in
India. It is a very singular government in which
every member of the administration wishes to
get out of the country, and consequently to have
done with the government, as soon as he can,
and to whose interest, the day after he has left
it and carried his whole fortune with him, it is
perfectly indifferent though the whole country
was swallowed up by an earthquake.

I mean not, however, by any thing which I
have here said, to throw any odious imputation
upon the general character of the servants of
the East India company, and much less upon
that of any particular persons. It is the system
of government, the situation in which they are
placed, that I mean to censure ; not the character
of those who have acted in it. They acted as
their situation naturally directed, and they who
have clamoured the loudest against them would,
probably, not have acted better themselves. In
war and negotiation, the councils of Madras and
Calcutta have upon several occasions conducted
themselves with a resolution and decisive wisdom
which would have done honour to the senate of
Rome in the best days of that republic. The
members of those councils, however, had been
bred to professions very different from war and
politics. But their situation alone, without edu
cation, experience, or even example, seems to
have formed in them all at once the great qua
lities which it required, and to have inspired
them both with abilities and virtues which they

CHAP. viil. THE WEALTH OF NATIONS. 485

themselves could not well know that they pos
sessed. If upon some occasions, therefore, it has
animated them to actions of magnanimity which
could not well have been expected from them, we
should not wonder if upon others it has prompted
them to exploits of somewhat a different nature.
Such exclusive companies, therefore, are nui
sances in every respect; always more or less in
convenient to the countries in which they are
established, and destructive to those which have
the misfortune to fall under their government.

CHAPTER VIIL

Conclusion of the Mercantile System.

THOUGH the encouragement of exportation,
and the discouragement of importation, are the
two great engines by which the mercantile sys
tem proposes to enrich every country, yet with
regard to some particular commodities, it seems
to follow an opposite plan : to discourage expor
tation and to encourage importation. Its ulti
mate object, however, it pretends, is always the
same, to enrich the country by an advantageous
balance of trade. It discourages the exporta
tion of the materials of manufacture, and of the
instruments of trade, in order to give our own
workmen an advantage, and to enable them to
undersell those of other nations in all foreign
markets: and by restraining, in this manner,

486 THE NATURE AND CAUSES OF BOOK IV.

the exportation of a few commodities, of no great
price, it proposes to occasion a much greater
and more valuable exportation of others. It en
courages the importation of the materials of
manufacture, in order that our own people may
be enabled to work them up more cheaply, and
thereby prevent a greater and more valuable
importation of the manufactured commodities.
I do not observe, at least in our Statute Book,
any encouragement given to the importation of
the instruments of trade. When manufactures
have advanced to a certain pitch of greatness,
the fabrication of the instruments of trade be
comes itself the object of a great number of
very important manufactures. To give any
particular encouragement to the importation of
such instruments, would interfere too much
with the interest of those manufactures. Such
importation, therefore, instead of being en
couraged, has frequently been prohibited. Thus
the importation of wool cards, except from Ire
land, or when brought in as wreck or prize
goods, was prohibited by the 3d of Edward IV. ;
which prohibition was renewed by the 39th of
Elizabeth, and has been continued and rendered
perpetual by subsequent laws.

The importation of the materials of manufac
ture has sometimes been encouraged by an ex
emption from the duties to which other goods
are subject, and sometimes by bounties.

The importation of sheep's wool from several
different countries, of cotton wool from all coun
tries, of undressed flax, of the greater part of

CHAP. viii. THE WEALTH OF NATIONS. 487

dying drugs, of the greater part of undressed
hides from Ireland or the British colonies, of seal
skins from the British Greenland fishery, of pig
and bar iron from the British colonies, as well
as of several other materials of manufacture,
has been encouraged by an exemption from all
duties, if properly entered at the custom-house.
The private interest of our merchants and ma
nufacturers may, perhaps, have extorted from
the legislature these exemptions, as well as the
greater part of our other commercial regulations.
They are, however, perfectly just and reason
able, and if, consistently with the necessities of
the state, they could be extended to all the
other materials of manufacture, the public would
certainly be a gainer.

The avidity of our great manufacturers, how
ever, has in some cases extended these exemp
tions a good deal beyond what can justly be
considered as the rude materials of their work.
By the 24 Geo. II. chap. 46., a small duty of
only one penny the pound was imposed upon the
importation of foreign brown linen yarn, instead
of much higher duties to which it had been sub
jected before, viz. of sixpence the pound upon
sail yarn, of one shilling the pound upon all
French and Dutch yarn, and of two pounds
thirteen shillings and fourpence upon the hun
dred weight of all spruce or Muscovia yarn. But
our manufacturers were not long satisfied with
this reduction. By the 29th of the same king,
chap. 15., the same law which gave a bounty upon
the exportation of British and Irish linen of which

488 THE NATURE AND CAUSES OF BOOK iv.

the price did not exceed eighteen pence the
yard, even this small duty upon the importation
of brown linen yarn was taken away. In the
different operations, however, which are neces
sary for the preparation of linen yarn, a good
deal more industry is employed, than in the sub
sequent operation of preparing linen cloth from
linen yarn. To say nothing of the industry of
the flax-growers and flax-dressers, three or four
spinners, at least, are necessary, in order to keep
one weaver in constant employment; and more
than four-fifths of the whole quantity of labour,
necessary for the preparation of linen cloth, is
employed in that of linen yarn ; but our spinners
are poor people, women commonly scattered
about in all different parts of the country, with
out support or protection. It is not by the sale
of their work, but by that of the complete work
of the weavers, that our great master manufac
turers make their profits. As it is their inte
rest to sell the complete manufacture as dear,
so is it to buy the materials as cheap as pos
sible. By extorting from the legislature bounties
upon the exportation of their own linen, high
duties upon the importation of all foreign linen,
and a total prohibition of the home consumption
of some sorts of French linen, they endeavour
to sell their own goods as dear as possible. By
encouraging the importation of foreign linen
yarn, and thereby bringing it into competition
with that which is made by our own people,
they endeavour to buy the work of the poor
spinners as cheap as possible. They are as in-

CHAP. VIII. THE WEALTH OF NATIONS. 489

tent to keep down the wages of their own weavers,
as the earnings of the poor spinners, and it is
by no means for the benefit of the workman, that
they endeavour either to raise the price of the
complete work, or to lower that of the rude ma
terials. It is the industry which is carried on for
the benefit of the rich and the powerful, that is
principally encouraged by our mercantile system.
That which is carried on for the benefit of the
poor and the indigent, is too often either ne
glected or oppressed.

Both the bounty upon the exportation of
linen and the exemption from the duty upon the
importation of foreign yarn, which were granted
only for fifteen years, but continued by two
different prolongations, expire with the end of
the session of parliament which shall immediately
follow the 24th of June, 1786.

The encouragement given to the importation
of the materials of manufacture by bounties, has
been principally confined to such as were im
ported from our American plantations.

The first bounties of this kind were those
granted about the beginning of the present cen
tury, upon the importation of naval stores from
America. Under this denomination were com
prehended timber fit for masts, yards, and bow
sprits ; hemp, tar, pitch, and turpentine. The
bounty, however, of one pound the ton upon
masting-timber, and that of six pounds the ton
upon hemp, were extended to such as should be
imported into England and Scotland. Both
these bounties continued without any variation,

490 THE NATURE AND CAUSES OF BOOK IV.

at the same rate, till they were severally allowed
to expire ; that upon hemp on the first of Janu
ary, 17^1> and that upon masting timber at the
end of the session of parliament immediately fol
lowing the 24th June, 1781.

The bounties upon the importation of tar,
pitch, and turpentine, underwent, during their
continuance, several alterations. Originally that
upon tar was four pounds the ton ; that upon
pitch the same ; and that upon turpentine, three
pounds the ton. The bounty of four pounds the
ton upon tar was afterwards confined to such
as had been prepared in a particular manner ;
that upon other good, clean, and merchantable
tar was reduced to two pounds four shillings the
ton. The bounty upon pitch was likewise re
duced to one pound ; and that upon turpentine
to one pound ten shillings the ton.

The second bounty upon the importation of any
of the materials of manufacture, according to the
order of time, was that granted by the 21 Geo. II.
chap. 30., upon the importation of indigo from
the British plantations. When the plantation in
digo was worth three-fourths of the price of the
best French indigo, it was by this act entitled to
a bounty of sixpence the pound. This bounty,
which, like most others, was granted only for a
limited time, was continued by several prolonga
tions, but was reduced to fourpence the pound. It
was allowed to expire with the end of the session of
parliament which followed the 25th March, 1781 .

The third bounty of this kind was that granted
(much about the time that we were beginning

CHAP. VIII. THE WEALTH OF NATIONS. 491

sometimes to court and sometimes to quarrel
with our American colonies) by the 4 Geo. III.
chap. 26., upon the importation of hemp, or un
dressed flax, from the British plantations. This
bounty was granted for twenty-one years, from
the 24th June, 1764, to the 24th June, 1785.
For the first seven years it was to be at the rate
of eight pounds the ton, for the second at six
pounds, and for the third at four pounds. It
was not extended to Scotland, of which the cli
mate (although hemp is sometimes raised there,
in small quantities and of an inferior quality) is
not very fit for that produce. Such a bounty
upon the importation of Scotch flax into England
would have been too great a discouragement to
the native produce of the southern part of the
united kingdom.

The fourth bounty of this kind, was that
granted by the 5 Geo. III. chap. 45., upon the
importation of wood from America. It was
granted for nine years, from the 1st January,
1766, to the 1st January, 1775. During the
first three years, it was to be for every hundred
and twenty good deals, at the rate of one pound;
and for every load containing fifty cubic feet of
other squared timber, at the rate of twelve shil
lings. For the second three years, it was for
deals, to be at the rate of fifteen shillings, and
for other squared timber, at the rate of eight
shillings ; and for the third three years, it was
for deals, to be at the rate of ten shillings, and
for other squared timber, at the rate of five
shillings.

492 THE NATUKE AND CAUSES OF BOOK iv.

The fifth bounty of this kind, was that granted
by the 9 Geo. III. chap. 38., upon the import
ation of raw silk from the British - plantations.
It was granted for twenty-one years, from the
1st January, 1770, to the 1st January, 1791. For
the first seven years, it was to be at the rate of
twenty-five pounds for every hundred pounds
value ; for the second, at twenty pounds ; and
for the third, at fifteen pounds. The manage
ment of the silk-worm, and the preparation of
silk, requires so much hand labour, and labour
is so very dear in America, that even this great
bounty, I have been informed, was not likely to
produce any considerable effect.

The sixth bounty of this kind, was that
granted by 11 Geo. III. chap. 50., for the im
portation of pipe, hogsheads, and barrel staves
and heading from the British plantations. It
was granted for nine years, from 1st January,
1772, to the 1st January, 1781. For the first
three years, it w^as for a certain quantity of each,
to be at the rate of six pounds ; for the second
three years, at four pounds ; and for the third
three years, at two pounds.

The seventh and last bounty of this kind,
was that granted by the 19 Geo. III. chap. 37.
upon the importation of hemp from Ireland.
It was granted in the same manner as that for
the importation of hemp and undressed flax from
America, for twenty-one years, from the 24th
June, 1779, to the 24th June, 1800. This term
is divided, likewise, into three periods of seven
years each j and in each of those periods the

CHAP. VIII. THE WEALTH OF NATIONS, 493

rate of the Irish bounty is the same with that
of the American. It does not, however, like
the American bounty, extend to the importation
of undressed flax. It would have been too great
a discouragement to the cultivation of that plant
in Great Britain. When this last bounty was
granted, the British and Irish legislatures were
not in much better humour with one another,
than the British and American had been before.
But this boon to Ireland, :it is to be hoped, has
been granted under more fortunate auspices,
than all those to America.

The same commodities upon which we thus
gave bounties, when imported from America,
were subjected to considerable duties when im
ported from any other country. The interest of
our American colonies was regarded as the same
with that of the mother country. Their wealth
was considered as our wealth. Whatever money
was sent out to them, it was said, came all back
to us by the balance of trade, and we could
never become a farthing the poorer by any ex
pense which we could lay out upon them. They
were our own in every respect, and it was an
expense laid out upon the improvement of our
own property, and for the profitable employment
of our own people. It is unnecessary, I appre
hend, at present to say any thing further, in
order to expose the folly of a system, which fatal
experience has now sufficiently exposed. Had
our American colonies really been a part of Great
Britain, those bounties might have been con
sidered as bounties upon production, and would

494 THE NATURE AND CAUSES OF BOOK IV.

still have been liable to all the objections to which
such bounties are liable, but to no other.

The exportation of the materials of manufac
ture is sometimes discouraged by absolute prohi
bitions, and sometimes by high duties.

Our woollen manufacturers have been more
successful than any other class of workmen, in
persuading the legislature that the prosperity of
the nation depended upon the success and exten
sion of their particular business. They have not
only obtained a monopoly against the consumers
by an absolute prohibition of importing woollen
cloths from any foreign country; but they have
likewise obtained another monopoly against the
sheep farmers and growers of wool, by a similar
prohibition of the exportation of live sheep and
wool. The severity of many of the laws which
have been enacted for the security of the revenue
is very justly complained of, as imposing heavy
penalties upon actions which, antecedent to the
statutes that declared them to be crimes, had al
ways been understood to be innocent. But the
cruellest of our revenue laws, I will venture to
affirm, are mild and gentle, in comparison of some
of those which the clamour of our merchants and
manufacturers has extorted from the legislature
for the support of their own absurd and oppres
sive monopolies. Like the laws of Draco, these
laws may be said to be all written in blood.

By the 8th of Elizabeth, chap. 3., the exporter
of sheep, lambs, or rams, was for the first offence
to forfeit all his goods for ever, to suffer a year's
imprisonment, and then to have his left hand cut

CHAP. vill. THE WEALTH OF NATIONS. 495

off in a market town upon a market day, to be
there nailed up ; and for the second offence to be
adjudged a felon, and to suffer death accordingly.
To prevent the breed of our sheep from being
propagated in foreign countries, seems to have
been the object of this law. By the 13th and 14th
of Charles II. chap. 18., the exportation of wool
was made felony, and the exporter subjected to
the same penalties and forfeitures as a felon.

For the honour of the national humanity, it
is to be hoped that neither of these statutes were
ever executed. The first of them, however, so
far as I know, has never been directly repealed,
and Sergeant Hawkins seems to consider it as
still in force. It may however, perhaps, be
considered as virtually repealed by the 12th of
Charles II. chap. 32. sect. 3., which, without
expressly taking away the penalties imposed
by former statutes, imposes a new penalty, viz.
That of twenty shillings for every sheep ex
ported, or attempted to be exported, together
with the forfeiture of the sheep and of the owner's
share of the sheep. The second of them was ex
pressly repealed by the 7th and 8th of William III.
chap. 28. sec. 4., by which it is declared that,
"Whereas the statute of the 13th and 14th of
" King Charles II. made against the exportation
cc of wool, among other things in the said act
" mentioned, doth enact the same to be deemed
" felony ; by the severity of which penalty the
"prosecution of offenders hath not been so ef-
" fectually put in execution : Be it, therefore,
"enacted by the authority aforesaid, that so

496 THE NATURE AND CAUSES OF BOOK IV.

"much of the said act, which relates to the
" making the said offence felony, be repealed
" and made void."

The penalties, however, which are either im
posed by this milder statute, or which, though
imposed by former statutes, are not repealed by
this one, are still sufficiently severe. Besides the
forfeiture of the goods, the exporter incurs the
penalty of three shillings for every pound weight
of wool either exported or attempted to be ex
ported, that is about four or five times the va
lue. Any merchant or other person convicted
of this offence is disabled from requiring any
debt or account belonging to him from any fac
tor or other person. Let his fortune be what it
will, whether he is or is not able to pay those
heavy penalties, the law means to ruin him com
pletely. But as the morals of the great body
of the people are not yet so corrupt as those of
the contrivers of this statute, I have not heard
that any advantage has ever been taken of this
clause. If the person convicted of this offence
is not able to pay the penalties within three
months after judgment, he is to be transported
for seven years, and if he returns before the ex
piration of that term, he is liable to the pains of
felony, without benefit of the clergy. The owner
of the ship knowing this offence forfeits all his
interest in the ship and furniture. The master
and mariners knowing this offence forfeit all
their goods and chattels, and suffer three months'
imprisonment. By a subsequent statute the ma
ster suffers six months' imprisonment.

CHAP. vill. THE WEALTH OF NATIONS. 497

In order to prevent exportation, the whole
inland commerce of wool is laid under very bur
densome and oppressive restrictions. It cannot
be packed in any box, barrel, cask, case, chest,
or any other package, but only in packs of
leather or pack cloth, on which must be marked
on the outside the words wool or yarn, in large
letters not less than three inches long, on pain
of forfeiting the same and the package, and three
shillings for every pound weight, to be paid by
the owner or packer. It cfannot be loaden on
any horse or cart, or carried by land within five
miles of the coast, but between sun-rising and
sun-setting on pain of forfeiting the same, the
horses and carriages. The hundred next ad
joining to the sea-coast, out of or through which
the wool is carried or exported, forfeits twenty
pounds, if the wool is under the value of ten
pounds ; and if of greater value, then treble
that value, together with treble costs, to be
sued for within the year. The execution to be
against any two of the inhabitants, whom the
sessions must reimburse, by an assessment on
the other inhabitants, as in the cases of robbery.
And if any person compounds with the hundred
for less than this penalty, he is to be imprisoned
for five years ; and. any other person may pro
secute. These regulations take place through
the whole kingdom.

But in the particular counties of Kent and
Sussex the restrictions are still more troublesome.
Every owner of wool within ten miles of the sea-
coast must give an account in writing, three days

VOL. II. K K

498 THE NATUHE AND CAUSES OF BOOK IV.

after shearing, to the next officer of the customs,
of the number of his fleeces, and of the places
where they are lodged. And before he removes
any part of them he must give the like notice
of the number and weight of the fleeces, and
of the name and abode of the person to whom
they are sold, and of the place to which it is
intended they should be carried. No person
within fifteen miles of the sea in the said coun
ties, can buy any wool, before he enters into
bond to the king, that no part of the wool which
he shall so buy shall be sold by him to any other
person within fifteen miles of the sea. If any
wool is found carrying towards the sea-side in
the said counties, unless it has been entered and
security given as aforesaid, it is forfeited, and
the offender also forfeits three shillings for every
pound weight. If any person lay any wool, not
entered as aforesaid, within fifteen miles of the
sea, it must be seized and forfeited, and' if after
such seizure, any person shall claim the same,
he must give security to the exchequer, that if
he is cast upon trial he shall pay treble costs,
besides all other penalties.

When such restrictions are imposed upon the
inland trade, the coasting trade, we may believe,
cannot be left very free. Every owner of wool
who carrieth, or causeth to be carried, any wool
to any port or place on the sea-coast, in order to
be from thence transported by sea to any other
place or port on the coast, must first cause an
entry thereof to be made at the port from whence
it is intended to be conveyed, containing the

CHAP. VIII. THE WEALTH OF NATIONS. 499

weight, marks, and number of the packages,
before he brings the same within five miles of
that port; on pain of forfeiting the same, and also
the horses, carts, and other carriages ; and also
of suffering and forfeiting, as by the other laws
in force against the exportation of wool. This
law, however, (1 Will. III. chap. 32.) is so very
indulgent as to declare, that " this shall not
" hinder any person from carrying his wool
" home from the place of shearing, though it be
" within five miles of the sea, provided that in
" ten days after shearing, and before he remove
" the wool, he do under his hand certify to the
" next officer of the customs, the true number
" of fleeces, and where it is housed ; and do not
" remove the same, without certifying to such
" officer, under his hand, his intention so to do,
" three days before." Bond must be given that
the wool to be carried coast-ways is to be landed
at the particular port for which it is entered out
wards ; and if any part of it is landed without
the presence of an officer, not only the forfeiture
of the wool is incurred as in other goods, but
the usual additional penalty of three shillings
for every pound weight is likewise incurred.

Our woollen manufacturers, in order to justify
their demand of such extraordinary restrictions
and regulations, confidently asserted, that En
glish wool was of a peculiar quality, superior to
that of any other country ; that the wool of other
countries could not, without some mixture of it,
be wrought up into any tolerable manufacture ;
that fine cloth could not be made without it;

KK2

500 THE NATURE AND CAUSES OF BOOK IV.

that England, therefore, if the exportation of it
could be totally prevented, could monopolize to
herself almost the whole woollen trade of the
world ; and thus, having no rivals, could sell at
what price she pleased, and in a short time ac
quire the most incredible degree of wealth by
the most advantageous balance of trade. This
doctrine, like most other doctrines which are
confidently asserted by any considerable number
of people, was, and still continues to be, most
implicitly believed by a much greater number ;
by almost all those who are either unacquainted
with the woollen trade, or who have not made
particular inquiries. It is, however, so perfectly
false, that English wool is in any respect neces
sary for the making of fine cloth, that it is alto
gether unfit for it. Fine cloth is made alto
gether of Spanish wool. English wool cannot
be even so mixed with Spanish wool as to enter
into the composition without spoiling and de
grading, in some degree, the fabric of the cloth.
It has been shown in the foregoing part of
this work, that the effect of these regulations has
been to depress the price of English wool, not
only below what it naturally would be in the pre
sent times, but very much below what it actually
was in the time of Edward III. The price of
Scots wool, when in consequence of the union
it became subject to the same regulations, is said
to have fallen about one half. It is observed by
the very accurate and intelligent author of the
Memoirs of Wool, the Reverend Mr. John
Smith, that the price of the best English wool in

CHAP. vni. THE WEALTH OF NATIONS. 501

England is generally below what wool of a very
inferior quality commonly sells for in the market
of Amsterdam. To depress the price of this
commodity below what may be called its natural
and proper price, was the avowed purpose of
those regulations ; and there seems to be no
doubt of their having produced the effect that
was expected from them.

This reduction of price, it may perhaps be
thought, by discouraging the growing of wool,
must have reduced very much the annual pro
duce of that commodity, though not below what
it formerly was, yet below what, in the present
state of things, it would probably have been,
had it, in consequence of an open and free mar
ket, been allowed to rise to the natural and pro
per price. I am, however, disposed to believe,
that the quantity of the annual produce cannot
have been much, though it may perhaps have
been a little, affected by these regulations. The
growing of wool is not the chief purpose for
which the sheep farmer employs his industry and
stock. He expects his profit, not so much from
the price of the fleece, as from that of the car
case ; and the average or ordinary price of the
latter, must even, in many cases, make up to
him whatever deficiency there may be in the
average or ordinary price of the former. It has
been observed in the foregoing part of this work,
that, " Whatever regulations tend to sink the
" price, either of wool or of raw hides, below
what it naturally would be, must, in an im
proved and cultivated country, have some

cc

502 THE NATURE AND CAUSES OF BOOK iv.

" tendency to raise the price of butchers'-meat.
" The price both of the great and small cattle
" which are fed on improved and cultivated
" land, must be sufficient to pay the rent which
" the landlord, and the profit which the farmer,
" has reason to expect from improved and cul-
" tivated land. If it is not, they will soon cease
" to feed them. Whatever part of this price,
" therefore, is not paid by the wool and the
" hide, must be paid by the carcase. The less
" there is paid for the one, the more must be
" paid for the other. In what manner this
" price is to be divided upon the different parts
" of the beast, is indifferent to the landlords
" and farmers, provided it is all paid to them.
" In an improved and cultivated country, there-
" fore, their interest as landlords and farmers
" cannot be much affected by such regulations,
" though their interest as consumers may, by
" the rise in the price of provisions." Accord
ing to this reasoning, therefore, this degradation
in the price of wool is not likely, in an improved
and cultivated country, to occasion any diminu
tion in the annual produce of that commodity ;
except so far as, by raising the price of mutton,
it may somewhat diminish the demand for, and
consequently the production of, that particular
species of butchers'-meat. Its effect, however,
even in this way, it is probable, is not very con
siderable.

But though its effect upon the quantity of the
annual produce may not have been very con
siderable, its effect upon the quality, it may

CHAP. VIII. THE WEALTH OF NATIONS. 503

perhaps be thought, must necessarily have been
very great. The degradation in the quality of
English wool, if not below what it was in former
times, yet below what it naturally would have
been in the present state of improvement and
cultivation, must have been, it may perhaps be
supposed, very nearly in proportion to the de
gradation of price. As the quality depends upon
the breed, upon the pasture, and upon the ma
nagement and cleanliness of the sheep, during
the whole progress of the growth of the fleece,
the attention to these circumstances, it may
naturally enough be imagined, can never be
greater than in proportion to the recompense
which the price of the fleece is likely to make
for the labour and expense which that attention
requires. It happens, however, that the good
ness of the fleece depends, in a great measure,
upon the health, growth, and bulk, of the ani
mal ; the same attention which is necessary for
the improvement of the carcase, is, in some re
spects, sufficient for that of the fleece. Not
withstanding the degradation of price, English
wool is said to have been improved considerably
during the course even of the present century.
The improvement might perhaps have been
greater if the price had been better ; but the
lowness of price, though it may have obstructed,
yet certainly it has not altogether prevented that
improvement.

The violence of these regulations, therefore,
seems to have affected neither the quantity nor
the quality of the annual produce of wool so

504 THE NATURE AND CAUSES OF BOOK IV.

much as it might have been expected to do
(though I think it probable that it may have af
fected the latter a good deal more than the for
mer) ; and the interest of the growers of wool,
though it must have been hurt in some degree,
seems, upon the whole, to have been much less
hurt than could well have been imagined.

These considerations, however, will not justify
the absolute prohibition of the exportation of
wool. But they will fully justify the imposition
of a considerable tax upon that exportation,

To hurt in any degree the interest of any one
order of citizens, for no other purpose but to
promote that of some other, is evidently contrary
to that justice and equality of treatment which
the sovereign owes to all the different orders of
his subjects. But the prohibition certainly hurts,
in some degree, the interest of the growers of
wool, for no other purpose but to promote that
of the manufacturers.

Every different order of citizens is bound to
contribute to the support of the sovereign or
commonwealth. A tax of five, or even of ten
shillings upon the exportation of every tod of
wool, would produce a very considerable revenue
to the sovereign. It would hurt the interest of
the growers somewhat less than the prohibition,
because it would not probably lower the price
of wool quite so much. It would afford a suf
ficient advantage to the manufacturer, because,
though he might not buy his wool altogether so
cheap as under the prohibition, he would still
buy it, at least, five or ten shillings cheaper than

CHAP. VIII. THE WEALTH OP NATIONS. 505

any foreign manufacturer could buy it, besides
saving the freight and insurance, which the
other would be obliged to pay. It is scarce
possible to devise a tax which could produce
any considerable revenue to the sovereign, and
at the same time occasion so little inconveniency
to any body.

The prohibition, notwithstanding all the pe
nalties which guard it, does not prevent the
exportation of wool. It is exported, it is well
known, in great quantities. The great differ
ence between the price in the home and that in
the foreign market, presents such a temptation
to smuggling, that all the rigour of the law can
not prevent it. This illegal exportation is ad
vantageous to nobody but the smuggler. A legal
exportation subject to a tax, by affording a re
venue to the sovereign, and thereby saving the
imposition of some other, perhaps, more burden
some and inconvenient taxes, might prove ad
vantageous to all the different subjects of the
state.

The exportation of fullers' earth, or fullers'
clay, supposed to be necessary for preparing and
cleansing the woollen manufactures, has been
subjected to nearly the same penalties as the
exportation of wool. Even tobacco-pipe clay,
though acknowledged to be different from ful
lers' clay, yet, on account of their resemblance,
and because fullers' clay might sometimes be ex
ported as tobacco-pipe clay, has been laid under
the same prohibitions and penalties.

506 THE NATURE AND CAUSES OF BOOK IV.

By the 13th and 14th of Charles II. chap. 7.
the exportation, not only of raw hides, but of
tanned leather, except in the shape of boots,
shoes, or slippers, was prohibited ; and the law
gave a monopoly to our boot-makers and shoe
makers, not only against our graziers, but against
our tanners. By subsequent statutes, our tanners
have got themselves exempted from this mono
poly, upon paying a small tax of only one shil
ling on the hundred weight of tanned leather,
weighing one hundred and twelve pounds. They
have obtained likewise the drawback of two-
thirds of the excise duties imposed upon their
commodity, even when exported without further
manufacture. All manufactures of leather may
be exported duty free ; and the exporter is be
sides entitled to the drawback of the whole du
ties of excise. Our graziers still continue sub
ject to the old monopoly. Graziers, separated
from one another, and dispersed through all the
different corners of the country, cannot, with
out great difficulty, combine together for the
purpose either of imposing monopolies upon
their fellow-citizens, or of exempting themselves
from such as may have been imposed upon
them by other people. Manufacturers of all
kinds, collected together in numerous bodies in
all great cities, easily can. Even the horns of
cattle are prohibited to be exported ; and the
two insignificant trades of the homer and comb-
maker enjoy, in this respect, a monopoly against
the graziers.

CHAP. VIII. THE WEALTH OF NATIONS. 507

Restraints, either by prohibitions or by taxes,
upon the exportation of goods which are par
tially, but not completely manufactured, are
not peculiar to the manufacture of leather. As
long as any thing remains to be done, in order
to fit any commodity for immediate use and con
sumption, our manufacturers think that they
themselves ought to have the doing of it. Wool
len yarn and worsted are prohibited to be ex
ported under the same penalties as wool. Even
white cloths are subject to a duty upon exporta
tion, and our dyers have so far obtained a mono
poly against our clothiers. Our clothiers would
probably have been able to defend themselves
against it, but it happens that the greater part of
our principal clothiers are themselves likewise
dyers. Watch-cases, clock-cases, and dial-plates
for clocks and watches, have been prohibited to
be exported. Our clock-makers and watch
makers are, it seems, unwilling that the price of
this sort of workmanship should be raised upon
them by the competition of foreigners.

By some old statutes of Edward III., Henry
VIII., and Edward VI., the exportation of all
metals was prohibited. Lead and tin were alone
excepted ; probably on account of the great
abundance of those metals ; in the exportation of
which, a considerable part of the trade of the
kingdom in those days consisted. For the en
couragement of the mining trade, the 5th of Wil
liam and Mary, chap. 17. exempted from this
prohibition, iron, copper, and mundic metal
made from British ore. The exportation of all

508 THE NATURE AND CAUSES OF BOOK IV.

sorts of copper bars, foreign as well as British,
was afterwards permitted by the 9th and 10th of
William III. chap. 26. The exportation of un
manufactured brass, of what is called gun-metal,
bell-metal, and shroff-metal, still continues to be
prohibited. Brass manufactures of all sorts may
be exported duty-free.

The exportation of the materials of manufac
ture, where it is not altogether prohibited, is in
many cases subjected to considerable duties.

By the 18th George I. chap. 15., the exporta
tion of all goods the produce or manufacture of
Great Britain, upon which any duties had been
imposed by former statutes, was rendered duty
free. The following goods, however, were ex-
cepted : alum, lead, lead ore, tin, tanned lea
ther, copperas, coals, wool, cards, white wool
len cloths, lapis calaminaris, skins of all sorts,
glue, coney hair or wool, hares' wool, hair of all
sorts, horses, and litharge of lead. If you ex
cept horses, all these are either materials of ma
nufacture, or incomplete manufactures (which
may be considered as materials for still further
manufacture), or instruments of trade. This
statute leaves them subject to all the old duties
which had ever been imposed upon them, the
old subsidy and one per cent, outwards.

By the same statute a great number of foreign
drugs for dyers' use. are exempted from all du
ties upon importation. Each of them, how
ever, is afterwards subjected to a certain duty,
not indeed a very heavy one, upon exportation.
Our dyers, it seems, while they thought it for

CHAP. VIII." THE WEALTH OF NATIONS. 509

their interest to encourage the importation of
those drugs, by an exemption from all duties,
thought it likewise for their own interest to
throw some small discouragement upon their
exportation. The avidity, however, which sug
gested this notable piece of mercantile inge
nuity, most probably disappointed itself of its
object. It necessarily taught the importers to
be more careful than they might otherwise have
been, that their importation should not exceed
what was necessary for the supply of the home
market. The home market was at all times
likely to be more scantily supplied ; the com
modities were at all times likely to be some
what dearer there than they would have been,
had the exportation been rendered as free as
the importation.

By the above-mentioned statute, gum senega
or gum arabic, being among the enumerated
dying drugs, might be imported duty free. They
were subjected, indeed, to a small poundage
duty amounting only to three-pence in the hun
dred weight upon their re-exportation. France
enjoyed, at that time, an exclusive trade to the
country most productive of those drugs, that
which lies in the neighbourhood of the Senegal;
and the British market could not be easily sup
plied by the immediate importation of them from
the place of growth. By the 25th Geo. II., there
fore, gum senega was allowed to be imported
(contrary to the general dispositions of the act
of navigation), from any part of Europe. As
the law, however, did not mean to encourage

510 THE NATURE AND CAUSES OF BOOK IV.

this species of trade, so contrary to the general
principles of the mercantile policy of England,
it imposed a duty of ten shillings the hundred
weight upon such importation, and no part of
this duty was to be afterwards drawn back upon
its exportation. The successful war which be
gan in 1755 gave Great Britain the same exclu
sive trade to those countries which France had
enjoyed before. Our manufacturers, as soon as
the peace was made, endeavoured to avail them
selves of this advantage, and to establish a mo
nopoly in their own favour, both against the
growers, and against the importers of this com
modity. By the 5th Geo. III. therefore, chap.
37. the exportation of gum senega from his ma
jesty's dominions in Africa was confined to Great
Britain, and was subjected to all the same re
strictions, regulations, forfeitures, and penalties
as that of the enumerated commodities of the
British colonies in America and the West Indies.
Its importation, indeed, was subjected to a small
duty of six-pence the hundred weight, but its re
exportation was subjected to the enormous duty
of one pound ten shillings the hundred weight.
It was the intension of our manufacturers that
the whole produce of those countries should be
imported into Great Britain, and, in order that
they themselves might be enabled to buy it at
their own price, that no part of it should be ex
ported again, but at such an expense as would
sufficiently discourage that exportion. Their
avidity, however, upon this, as well as upon
many other occasions, disappointed itself of its

CHAP. VIII. THE WEALTH OF NATIONS. 511

object. This enormous duty presented such a
temptation to smuggling, that great quantities
of this commodity were clandestinely exported,
probably to all the manufacturing countries of
Europe, but particularly to Holland, not only
from Great Britain but from Africa. Upon this
account, by the 14 Geo. III. chap. 10. this duty
upon exportation was reduced to five shillings
the hundred-weight.

In the book of rates, according to which the
old subsidy was levied, beaver skins were esti
mated at six shillings and eight-pence a piece,
and the different subsidies and imposts, which
before the year 17^2 had been laid upon their
importation, amounted to one-fifth part of the
rate, or to sixteen-pence upon each skin ; all of
which, except half the old subsidy, amounting
only to two -pence, was drawn back upon expor
tation. This duty upon the importation of so
important a material of manufacture had been
thought too high, and, in the year 1722, the rate
was reduced to two shillings and six-pence,
which reduced the duty upon importation to
six-pence, and of this only one half was to be
drawn back upon exportation. The same suc
cessful war put the country most productive of
beaver under the dominion of Great Britain, and
beaver skins being among the enumerated com
modities, their exportation from America was
consequently confined to the market of Great
Britain. Our manufacturers soon bethought
themselves of the advantage which they might
make of this circumstance, and in the year

THE NATURE AND CAUSES OF BOOK IV.

I

the duty upon the importation of beaver-skin was
reduced to one penny, but the duty upon expor
tation was raised to seven-pence each skin, with
out any drawback of the duty upon importation.
By the same law, a duty of eighteen-pence the
pound was imposed upon the exportation of bea
ver-wool or wombs, without making any altera
tion in the duty upon the importation of that
commodity, which, when imported by British
and in British shipping, amounted at that time
to between four-pence and five-pence the piece.

Coals may be considered both as a material
of manufacture, and as an instrument of trade.
Heavy duties, accordingly, have been imposed
upon their exportation, amounting at present
(1783) to more than five shillings the ton, or
to more than fifteen shillings the chaldron,
Newcastle measure; which is in most cases more
than the original value of the commodity at the
coal-pit, or even at the shipping port for export
ation.

The exportation, however, of the instruments
of trade, properly so called, is commonly re
strained, not by high "duties, but by absolute
prohibitions. Thus by the ?th and 8th of Wil
liam III. chap. 20. sect. 8. the exportation of
frames or engines for knitting gloves or stock
ings is prohibited under the penalty, not only of
the forfeiture of such frames or engines, so ex
ported, or attempted to be exported, but of
forty pounds, one half to the king, the other to
the person who shall inform or sue for the same.
In the same manner, by the 14 Geo. III. chap.

CHAP. Vlll. THE WEALTH OF NATIONS. 513

71. the exportation to foreign parts, of any
utensils made use of in the cotton, linen, wool
len, and silk manufactures, is prohibited under
the penalty, not only of the forfeiture of such
utensils, but of two hundred pounds to be paid
by the person who shall offend in this manner,
and likewise of two hundred pounds to be paid by
the master of the ship who shall knowingly suffer
such utensils to be loaded on board his ship.

When such heavy penalties were imposed
upon the exportation of the dead instruments
of trade, it could not well be expected that the
living instrument, the artificer, should be al
lowed to go free. Accordingly, by the 5 Geo, I.
chap. 27. the person who shall be convicted of
enticing any artificer of or in any of the manu
factures of Great Britain, to go into any foreign
parts, in order to practise or teach his trade, is
liable for the first offence to be fined in any sum
not exceeding one hundred pounds, and to three
months' imprisonment, and until the fine shall
be paid ; and for the second offence to be fined
in any sum at the discretion of the court, and to
imprisonment for twelve months, and until the
fine shall be paid. By the 23 Geo. II. chap. 13.
this penalty is increased for the first offence to
five hundred pounds for every artificer so en
ticed, and to twelve months' imprisonment, and
until the fine shall be paid ; and for the second
offence, to one thousand pounds, and to two
years' imprisonment, and until the fine shall be
paid.

VOL, II. L L

THE NATURE AND CAUSES OF BOOK iv.

By the former of those two statutes, upon
proof that any person has been enticing any
artificer, or that any artificer has promised or
contracted to go into foreign parts for the pur
poses aforesaid, such artificer may be obliged
to give security at the discretion of the court,
that he shall not go beyond the seas, and may
be committed to prison until he give such
security.

If any artificer has gone beyond the seas, and
is exercising or teaching his trade in any foreign
country, upon warning being given to him by
any of his majesty's ministers or consuls abroad,
or by one of his majesty's secretaries of state for
the time being, if he does not, within six months
after such warning, return into this realm, and
from thenceforth abide and inhabit continually
within the same, he is from thenceforth declared
incapable of taking any legacy devised to him
within this kingdom, or of being executor or
administrator to any person, or of taking any
lands within this kingdom, by descent, devise, or
purchase. He likewise forfeits to the king all
his lands, goods and chattels, is declared an alien
in every respect, and is put out of the king's
protection.

It is unnecessary, I imagine, to observe, how
contrary such regulations are to the boasted
liberty of the subject, of which we affect to be
so very jealous, but which, in this case, is so
plainly sacrificed to the futile interests of our
merchants and manufacturers.

CHAP. vill. THE WEALTH OF NATIONS. 515

The laudable motive of all these regulations,
is to extend our own manufactures, not by their
own improvement, but by the depression of those
of all our neighbours, and by putting an end,
as much as possible, to the troublesome compe
tition of such odious and disagreeable rivals.
Our master manufacturers, think it reasonable,
that they themselves should have the monopoly
of the ingenuity of all their countrymen. Though
by restraining, in some trades, the number of ap
prentices, which can be employed at one time,
and by imposing the necessity of a long appren
ticeship in all trades, they endeavour, all of
them, to confine the knowledge of their re
spective employments to as small a number as
possible ; they are unwilling, however, that any
part of this small number should go abroad to
instruct foreigners.

Consumption is the sole end and purpose of
all production ; and the interest of the producer
ought to be attended to, only so far as it may be
necessary for promoting that of the consumer.

The maxim is so perfectly self-evident, that
it would be absurd to attempt to prove it. But
in the mercantile system, the interest of the
consumer is almost constantly sacrificed to that
of the producer ; and it seems to consider pro
duction, and not consumption, as the ultimate
end and object of all industry and commerce.

In the restraints upon the importation of all
foreign commodities which can come into com
petition with those of our own growth, or manu
facture, the interest of the home-consumer is

LL2

516 THE NATURE AND CAUSES OF BOOK IV,

evidently sacrificed to that of the producer. It
is altogether for the benefit of the latter, that the
former is obliged to pay that enhancement of price
which this monopoly almost always occasions.

It is altogether for the benefit of the producer
that bounties are granted upon the exportation
of some of his productions. The home-consumer
is obliged to pay, first, the tax which is neces
sary for paying the bounty ; and secondly, the
still greater tax which necessarily arises from
the enhancement of the price of the commodity
in the home market.

By the famous treaty of commerce with Por
tugal, the consumer is prevented by high duties
from purchasing of a neighbouring country, a
commodity which our own climate does not pro
duce, but is obliged to purchase it of a distant
country, though it is acknowledged, that the
commodity of the distant country is of a worse
quality than that of the near one. The home-
consumer is obliged to submit to this incon
venience, in order that the producer may import
into the distant country some of his productions
upon more advantageous terms than he would
otherwise have been allowed to do. The con
sumer, too, is obliged to pay whatever enhance
ment in the price of those very productions,
this forced exportation may occasion in the
home market.

But in the system of laws which has been
established for the management of our American
and West Indian colonies, the interest of the
home-consumer has been sacrificed to that of

CHAP. viii. THE WEALTH OF NATIONS. 517

the producer with a more extravagant profusion
than in all our other commercial regulations.
A great empire has been established for the sole
purpose of raising up a nation of customers who
should be obliged to buy from the shops of our
different producers, all the goods with which
these could supply them. For the sake of that
little enhancement of price which this monopoly
might afford our producers, the home-consumers
have been burdened with the whole expense of
maintaining and defending that empire. For
this purpose, and for this purpose only, in the
two last wars, more than two hundred millions
have been spent, and a new debt of more than
a hundred and seventy millions has been con
tracted over and above all that had been ex
pended for the same purpose in former wars.
The interest of this debt alone is not only greater
than the whole extraordinary profit, which, it
ever could be pretended, was made by the mo
nopoly of the colony trade, but than the whole
value of that trade, or than the whole value of
the goods, which at an average have been an
nually exported to the colonies.

It cannot be very difficult to determine who
have been the contrivers of this whole mercan
tile system; not the consumers, we may believe,
whose interest has been entirely neglected ; but
the producers, whose interest has been so care
fully attended to; and among this latter class
our merchants and manufacturers have been by
far the principal architects. In the mercantile

518 THE NATURE AND CAUSES OF, &C. COOK IV.

regulations, which have been taken notice of in
this chapter, the interest of our manufacturers
has been most peculiarly attended to ; and the
interest, not so much of the consumers as that of
some other sets of producers, has been sacrificed
to it.

APPENDIX.

THE two following accounts are subjoined in
order to illustrate and confirm what is said in
the fifth chapter of the fourth book, concern
ing the tonnage bounty to the white herring
fishery. The reader, I believe, may depend
upon the accuracy of both accounts.

An Account of Busses fitted out in Scotland for
Eleven Years, with the Number of empty Bar
rels carried out, and the Number of Barrels of
Herrings caught; also the Bounty at a Me
dium on each Barrel of Seasfeeks, and on each
Barrel when fully packed.

r

Number of

Empty Barrels

Barrels of Her

Bounty paid oil the

1 C3TS.

Busses.

carried out.

rings caught.

Busses.

£ s. d.

1771

29

5948

2832

2085 0 0

1772

168

41316

22237

11055 7 6

1773

190

42333

42055

12510 8 6

1774

248

59303

56365

16952 2 6

1775

275

69144

52879

19315 15 0

1776

294

76329

51863

21290 7 6

1777

240

62679

43313

17592 2 6

1778

220

56390

40958

16316 2 6

1779

206

55194

29367

15287 0 0

1780

181

48315

19885

13445 12 6

1781

135

33992

16593

9613 12 6

Total, 2186

550943

378347

155463 11 0

APPENDIX.

Seasteeks 378347 Bounty at a medium

for each barrel of sea-
steeks, £ 0 8 2i
But a barrel of sea-
steeks being only reck
oned two-thirds of a
barrel fully packed,
one-third is deducted,
which brings the boun-

i deducted 126115-jj- ty to ^0 12 3-J-

Barrels full >
packed, )

And if the herrings are exported,
there is besides a premium of 028

So that the bounty paid by go
vernment in money for each barrel
is - *£() 14 llf

But if to this, the duty of the
salt usually taken credit for as ex
pended in curing each barrel, which
at a medium is of foreign, one
bushel and one fourth of a bushel,
at 10^. a bushel, be added, viz. 0 12 6

The bounty on each barrel would
amount to - - - - £ I 7 5 -I

APPENDIX.

If the herrings are cured with British salt, it
will stand thus, viz, —

Bounty as before, Jo 14

— but if to this bounty the duty on

two bushels of Scots salt at Is. 6d.

per bushel, supposed to be the quan

tity at a medium used in curing each

barrel, is added, to wit, - - 030

The bounty on each barrel will
amount to - - - £o 17

And, —

When buss herrings are entered for home-con
sumption in Scotland, and pay the shilling a
barrel of duty, the bounty stands thus, to wit, as
before - <£o 12 3-f-

From which the Is. a barrel is to
be deducted - - - O 1 O

£0 11 3

But to that there is to be added
again, the duty of the foreign salt
used in curing a barrel of herrings,
viz. .... I/.T - 0 12 6

So that the premium allowed for
each barrel of herrings entered for
home-consumption is £1 3

APPENDIX.

If the herrings are cured with British salt, it
will stand as follows, viz.

Bounty on each barrel, brought in by the
busses as above, £o 12 3%

From which deduct the 1 s. a bar
rel paid at the time they are entered
for home-consumption - 010

£0 11 3

But if to the bounty the duty on
two bushels of Scots salt at Is. 6^7.
per bushel, supposed to be the quan
tity at a medium used in curing
each barrel, is added, to wit, - 0 3 O

The premium for each barrel en
tered for home-consumption will be £0 14

Though the loss of duties upon herrings ex
ported, cannot, perhaps, properly be considered
as bounty ; that upon herrings entered for home-
consumption certainly may.

APPENDIX.

An Account of the Quantity of Foreign Salt im
ported into Scotland, and of Scots Salt delivered
Duty free from the Works therefor the Fishery,
from the 5th of April, 1771, to the 5th of April,
1782, with a Medium of both for one Year.

PERIOD.

Foreign Salt
imported.

Scots Salt de
livered from
the Works.

Bushels.

Bushels.

From the 5th of April, 1771, "^
to the 5th of April, 1782.)

Medium for one year,

93697*

168226

15179A

45293T3T

It is to be observed that the bushel of foreign
salt weighs 84<lb., that of British salt 561b. only.

END OF VOL. II.

Printed by T. Davison,
NVhitefriars.

HB Smith, Adam

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1822

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